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Own Damage Car Insurance

What is Own Damage Car Insurance?

Own-Damage (OD) Insurance, as the name suggests, helps policyholders stay covered against loss or damage of their vehicles due to incidents like fire, theft, etc. Standalone own-damage annual covers will only be extended to customers who already have a third-party insurance in place or would like to avail the two simultaneously. Unlike third-party insurance, having an own damage insurance cover is optional.

Industry Update: Insurance companies have been recently permitted by the Insurance Regulatory and Development Authority of India (IRDAI) to issue standalone own-damage policies for both old and new cars on an annual basis. Now, car owners can buy motor insurance in two ways - i) bundling 1-year OD policy with a 3-year third-party cover or ii) opting for a comprehensive policy, which would include OD cover for 3 years and third-party cover for 3 years. According to the guidelines issued by the regulator, insurers are presently not allowed to issue long term standalone own-damage policies.

Why is Own-Damage Car Insurance Important?

The protection extended by third-party cover is limited - it does not cover damages caused to the policyholder’s insured vehicle and for itself. The liability-only plan financially protects the vehicle-owner from legal liabilities arising out of an accident against third-party person and property. With an own-damage policy, the car-owner will receive compensation for the loss or damage sustained to his or her insured vehicle. The cost that is borne by the policyholder for repairing or replacing own car due to theft and covered calamities will be taken care of by the motor insurance company.

What is Own-Damage Premium?

Own-damage premium is the amount the car-owner will have to pay to the insurance company for availing the OD cover. In exchange for the premium payment, the risk is transferred to the insurer from the policyholder.

The premium for an own-damage policy is calculated as a percentage of Insurance Declared Value, as decided by the Indian Motor Tariff. IDV is calculated on the basis of the invoice of the vehicle minus depreciation. Higher the IDV, greater will be the premium and vice versa. Similarly, as the four-wheeler grows older, the IDV decreases.

How is Own-Damage Premium Calculated?

The formula that can be applied to calculate own-damage premium is as under:

OD premium = IDV X (Premium Rate) + Add-Ons – Discount and benefits

Here, IDV = (showroom price of the vehicle – depreciation) + (value of fitted accessories (if any) – depreciation)

Some of the other factors that are taken into consideration while fixing the own-damage premium include the car’s make & type, cubic capacity of the engine and geographical zone.

Difference Between Comprehensive, Third-Party and Own-Damage Car Insurance

Comprehensive Car InsuranceThird-Party InsuranceStandalone Own-Damage Insurance
Damages or losses to own car as a result of accidentYesNoYes
Damages or losses to own car on account of fireYesNoYes
Injuries or demise of a third-party personYesYesNo
Theft of own vehicleYesNoYes
Damage to third-party propertyYesYesNo

Note - Prior to availing a standalone own-damage car insurance, the applicant must ensure that he or she at least has a third-party insurance cover in place.

Add-on Covers

The add-on covers that can be availed with a standalone own-damage policy will vary from one insurance company to another. Some of the common add-ons offered are as follows:

  • Zero Depreciation Cover
  • NCB Retention Cover
  • Engine Protector Cover
  • Key Replacement Cover
  • Roadside Assistance Cover

Inclusions and Exclusions of Standalone Own-Damage Cover

The list of inclusions and exclusions of standalone own-damage cover will differ from one insurance provider to another. Here are some of the common inclusions and exclusions:

What is included?

  • Damage caused by accidents
  • Damage caused by fire and explosion
  • Damage caused by natural calamities like floods, earthquakes, etc.
  • Loss due to theft
  • Damage caused by man made calamities like riot, vandalism, etc.

What is not included?

  • Electrical and mechanical breakdown
  • Damage caused while driving under the influence of alcohol
  • Loss or damage due to war or nuclear risks
  • Loss or damage due to depreciation of the value of car

How to Make an Own-Damage Claim?

To make an own-damage claim, the individual must notify the insurance company and police (when the case requires) about the incident right away. The insurer will depute a surveyor to assess the loss. Individuals are advised to not attempt to move the car from the accident spot, without the permission of the insurance company and police. If the policy provides for cashless claim service, the insurance provider will directly pay the workshop.

What are the Documents Required to Make a Claim on Standalone Own-Damage Policy?

The documents required to file a claim on a standalone own-damage policy will differ across insurance companies. Some of the documents that an insurance company may insist on for processing a claim includes:

  • Copy of First Information Report (FIR)
  • Police report
  • Copy of Insurance Policy
  • Photocopy of driver's license
  • Vehicle registration certificate
  • Photo of damaged part
  • Repair bills

FAQs on Standalone Own Damage Car Insurance

Is own-damage cover a component of basic car insurance?

Basic car insurance refers to third-party liability insurance. According to the Motor Vehicles Act, 1988, having at least a third-party insurance is mandatory to drive on Indian roads. Third-party insurance covers the loss or damage suffered by the other people and property (third party) involved in the accident, and does not include own-damage cover.

What is the policy term of standalone own-damage policies?

Standalone own-damage insurance is an annual policy.

How is standalone own-damage premium computed?

Own-damage premium is calculated after factoring in the IDV, type of vehicle, year of purchase and geographical zone.

Can a vehicle be insured only with a standalone own-damage cover?

No, an applicant seeking a standalone own-damage policy must ensure that he or she at least has a third-party insurance policy in place. The start and end date of the third-party cover as well as the name of the issuer will be noted down while giving standalone OD policy.

Are standalone own-damage policies optional?

Yes, own-damage insurance policies are optional. Third-party cover is mandatory for all vehicles that run on Indian roads.