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    How Motor Insurance Works?

    A Motor Insurance Policy is a contract between the insurance company and insured that safeguards the policyholder against financial loss in case of Fire, theft or accident. Car Insurance offers coverage for property like theft or damage of your car liability, legal accountability to others for property damage, death, bodily injury, the expenses for injury treatment etc.

    As per the Motor Vehicle Act, it is mandatory for vehicle owners to buy car insurance for their vehicles plying on Indian roads. Car Insurance or motor insurance covers for losses that you might incur if your car gets damaged or stolen.

    The premium amount of your car insurance is decided on the basis of Insured Declared Value or IDV of the vehicle. If you increase the IDV, the premium rises and if you lower it, the premium reduces but it is subjected to IDV schedule and respective Insurance company. It is important for any policyholder to compare various car insurance options before going for a car insurance renewal or buying a new policy.

    Key Benefits Of Car Insurance

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    Types Of Car Insurance :

    Third Party Liability Coverage

    This compensates the damages to a third party and their property. It’s best for those planning to insure their car just because it’s mandatory (but we wouldn’t recommend that!).

    Third-party liability car insurance safeguards you from any legal liability due to your own car’s involvement in an accident. Your insurance provider will compensate you for death, disability, injury, or property damage to any third-party. Therefore, you are protected from the financial liability towards the third-party.

    Third-party Liability Car Insurance is a mandate in India under the Motor Vehicles Act, 1988.

    Comprehensive Coverage

    This covers damages to the third party, as well as your own car. It is best for those wanting to cover for losses for accidents and incidents such as theft and natural disasters.

    A comprehensive car insurance policy provides coverage for third party liability as well as damages caused to your own car. In comparison with third party liability car insurance, a comprehensive car insurance policy offers extensive coverage, more benefits and covers the damages caused to the insured car in case of an accident, collision, theft, etc.

    A comprehensive policy can be further extended by opting for addon covers like accessories cover, engine protector, zero depreciation cover, etc. This type of coverage is the most popular as it offers end-to-end coverage and thus less stress for the policyholder.

    Additional Covers In Car Insurance :

    This additional feature offers compensation even for the depreciating value of your car. With this feature, you will not have to pay for the depreciation value of your vehicle’s parts. It is mostly valid on private cars and is subjected to a specic number of claims during the policy period. Compulsory and voluntary deductibles (as per the case) will be applicable despite zero depreciation cover. You can check with the insurance company for any terms and conditions before making the purchase.

    Consumables Cover

    Sometimes, a bunch of unforeseen expenses can drain all your savings. Consumables Cover. Includes all the expenses incurred on consumable items for any perils that are covered under the policy. Consumable items include screws, nuts and bolts, washers, AC gas, grease, lubricants, bearings, clips, engine oil, distilled water, oil filter, brake oil, and fuel filter are mostly covered.

    There are certain terms and conditions that are applicable to this add-on cover that varies from one insurance provider to another. It is mostly valid on private cars and is subjected to a particular number of claims during the policy period. You can check with the insurance company before making the purchase.

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    Engine Protection Cover

    An engine is one of the most important part of a car and engfine protection cover compensates the cost of fixing the indirect damage that are caused to the engine due to lubricating oil leakage and water ingression. It covers the Gear Box Parts, Engine Parts, and Differential Parts.

    No Claim Bonus Protection Cover

    For every claim free year, the insured is rewarded with a discount on the renewal premium. This discount is called – No Claim Bonus (NCB). It is cumulative and increases every year. It usually ranges from 20% to 50% and can save a substantial amount of money on the premium payable for your auto insurance.

    Let’s take an example if a policyholder doesn’t make a claim during the tenure of his auto insurance policy, he becomes eligible for No Claim Bonus, on the basis of which, a certain rebate is offered on the payable premium. With No-claim-bonus protection cover you can retain your NCB even after registering a claim during the policy term. The terms and conditions vary from one insurer to another.

    No Claim Bonus (NCB) in Motor Insurance :

    1. NCB is called as ' No Claim Bonus ' and it is to be availed only after completion of 12 months claim free period.
    2. NCB can be earned only in the Own Damage section of policies covering all classes of vehicles; but not on Motor Trade Policies (Transit Risks, Road Risks & Internal Risks).
    3. A customer becomes entitled to NCB only at the renewal of a policy after the expiry of the full duration of 12 months; provided Nil claims. That means, during the policy year, if the ownership changed; the new owner has to wait 12 months. And it is eligible only at the time of renewal.
    4. If there is an ownership change during the currency of the policy; NCB will follow with the Old Owner but not with the vehicle.
    5. If there is no ownership change; NCB can be valid for 90 days after expiry of the policy.
    6. NCB can be given after all kinds of discounts only.
    7. NCB will be applicable for the substituted vehicle also; subject to that substituted vehicle should be of the same class of vehicle (as per tariff).
    8. Where the Insured is an individual, and on his/her death; the custody and use of the vehicle pass to his/her legal heirs; the NCB entitlement for the Original Insured will pass on to such persons;
    9. The percentage of NCB earned on a vehicle owned by an Institution; during the period when it was allotted to and exclusively operated by an employee should be passed on to the employee, if the ownership of the vehicle is transferred in the name of the said employee.

      (In this case, a suitable letter from the employer is compulsory)

    10. In the event of the insured, transferring his insurance from one insurer to another insurer, the transferee insurer may allow the same rate of NCB which the insured would have received from the previous insurer.
    11. In an insured vehicle is sold and not replaced immediately, or laid up, and the policy is not renewed immediately after expiry; NCB if any, may be granted on a subsequent insurance, provided such fresh insurance is effected within 3 years from the expiry of the previous insurance.

    (The rate of NCB applicable to the fresh policy is as per the earned percentage under expiry policy)

    Key Protection Cover:

    Once in a lifetime everyone would have lost or misplaced their car keys. In such cases, the insurer can offer you the financial help by covering the costs incurred on replacement and repair of your car keys.

    Personal Accident Rider Benefit :

    Personal Accident Rider is an optional add-on benefit that can be added to the comprehensive auto insurance by paying an extra premium. This rider provides the policyholder with the coverage of medical expenses due to damage, personal injury or disability caused due to an accident.

    Roadside Assistance Service

    Mechanical/electrical breakdown –

    If the vehicle has broken down at home or on the road, the insurer will arrange for a mechanic to repair it at the site of the breakdown. The mechanic will assist the car owner with battery jump start, replacement of flat tyre, and other minor electrical or mechanical repairs. In case the car owner has been locked out of the vehicle, pickup and delivery of spare keys will also be provided.

    Towing –

    If the insured vehicle is involved in an accident, the insurance company will arrange for it to be towed to a nearby network garage or authorised service centre safely.

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    Flat Battery –

    Making an alternate arrangement so that your car starts moving.If the battery needs to be changed, the car insurance company will take care of the repair costs, although you need to pay for the new battery

    Spare Key –

    Arranging for pickup and delivery of spare keys or providing unlocking services by a vehicle technician, is provided by the car insurance company

    Flat Tyre –

    Getting a technician to repair/replace the tyre, or arranging to take the tyre to the nearest repair facility. If the tyre needs to be changed, you will have to pay for it although the repair costs will be borne by the car insurance company

    Fuel Assistance –

    Arranging for the supply of up to 5 litres of fuel (the fuel is chargeable) if your car has run out of fuel, or arranging for towing to the nearest garage in case of immobilization due to contaminated fuel.

    Also, Taxi and Accommodation benefits are provided if you are too far from the city so that you and your family are safe in the first place.

    Exclusions: What Is Not Covered In A Car Insurance Policy?

    • Loss or damage if a policy is not in force.
    • Gradual wear and tear of car and its parts.
    • Loss or damage to the vehicle when driven by a person without a valid and effective driving license.
    • Loss or damage to the engine as a result of oil leakage.
    • Accidental Damages caused while you were using your car for illegal activities
    • Loss or damage to the vehicle as a result of intoxication due to drugs, alcohol etc.
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    Documentation Required For Car Insurance

    Getting a car insured requires minimal documentation. For a new policy, you must submit the filled-up proposal form and copy of the Registration Certificate (RC). For renewals, you will need a copy of the RC (Registration Certificate) along with the copy of the previous insurance policy. Carefully fill in your complete details. This is an important step and will save you a lot of hassle during claim time.

    Car Insurance Claim Process

    • First and foremost, as the policyholder, you will have to submit a duly filled in claim form along with the requisite documents to the insurance company and inform the insurance company before you send the car to the garage for any repairs. The forms are available on the insurers’ websites as well as at their offices.
    • The insurance company will send a surveyor to assess the damages. The surveyor will prepare a report and pass it on to the insurer and you will also receive a copy.
    • If the damage is severe and requires immediate attention, then the surveyor will reach the spot of the accident at the earliest.
    • Based on the surveyor’s report, you can arrange for your car to be repaired.
    • After the work is completed, you will have to take the duly signed bills and documents from the garage and submit them to surveyor, who in turn will send it to the insurance company.
    • If all the documents are in place, the insurance provider will reimburse your bills
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    Car Insurance Claim Process For A Third-Party Claim

    • If a third party has sent you a legal notice asking for a claim, do not communicate with the party before informing your insurance company. Also remember not to make any financial commitments or out-of-court settlements before speaking to your insurer first.
    • Submit a copy of the notice to your insurer.
    • You will also have to submit copies of the RC book of the car, the driving licence and the FIR.
    • The insurer will verify the documents and assess the accident and if found satisfactory, you will get a lawyer appointed by them.
    • If the court directs you to pay the damages to the third party thereafter, the insurance company will directly pay the dues to the third party.

    Car Insurance Claim Process For A Stolen Car

    • First of all, file a complaint with the police and lodge a FIR.
    • Submit a copy of the FIR to the insurance company.
    • Once you receive the final police report, make a copy of it and submit it to your insurance provider.
    • The insurance company will assign an investigator. Cooperate with the investigator.
    • Wait for the claim to be approved
    • Once that is done, submit the RC book of your stolen car to the insurance company. The name of the owner will then be changed to the insurer’s name.
    • Submit the duplicate keys of the car and also a subrogation letter. You will also need to submit a notarized indemnity on a stamp paper.
    • Once all the formalities are completed, the insurance company will disburse the claim
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    It is very important to be well informed about the formalities related to making a car insurance claim. Whether you need to make a small claim due to a minor accident or a major claim due to the theft of your car, knowing the procedures will make the job a lot simpler for you.

    All insurance providers these days have a very good customer support network and so you must communicate with your insurer whenever there is a need. If you have any doubts regarding the claims, get them sorted beforehand so that your car insurance claim process goes smoothly at the time of a need.

    Keep the points mentioned above in mind and your job of filing and receiving a car insurance claim will become a lot simpler.

    What are the add-ons in Motor vehicle insurance & how to decide them?

    Motor vehicle insurance policy becomes complete with add-ons such as zero depreciation, consumables cover, key protection cover, engine protection cover, roadside assistance cover, no claim bonus protector etc., all of which can be purchased on payment of an additional premium. Add-ons are a form of extra coverage to the vehicle in case of loss or damage due to an insured peril. As we know, vehicle insurance consists of third-party and own damage cover, which, when combined, is known as Comprehensive cover. A comprehensive cover would not provide complete protection to the insured in case of loss or damage. For instance, in case of a claim, insurance companies would factor in the parts' depreciation based on the vehicle's age, which reduces the overall claim payout. The depreciation factored at the time of claim settlement has to be borne by the insured if not for a Zero depreciation cover.

    Let us understand the different add-ons available in the motor vehicle insurance policy, which can be selected by the insured at the time of policy purchase.

    • Zero Depreciation

      Zero depreciation, Nil depreciation, or Bumper bumper cover is an add-on under the motor vehicle insurance policy. Zero depreciation is the most commonly availed add-on under motor vehicle insurance. It protects the insured from factoring in depreciation at the time of claim settlement. For example, if you have opted for Zero depreciation cover, the insurer would pay for the depreciation amount at the time of claim settlement, which is mandatory while settling claims. This is because the wear and tear of the vehicle parts would lead to depreciation, and insurance would only make good on the losses suffered by the insured. The rate of depreciation is fixed by the IRDA under the motor vehicle insurance schedule and is based on the age of the vehicle. Higher age leads to higher depreciation and an overall low amount of claims. Therefore, opting for a zero depreciation cover is advised to safeguard yourself from factoring for depreciation at the time of claim settlement.

    • Consumables

      Consumables are those items that cannot be reused after an accident or damage. Consumables in vehicles include Engine oil, gear oil, nuts and bolts, grease, washers, oil filters, air filters, steering oil, AC gas, radiator coolant and other similar items which cannot be repaired and reused. These items would not be payable under the comprehensive vehicle insurance policy as they come under consumables. Hence a consumables cover was introduced to cover the cost of consumables at the time of claim settlement. For instance, your comprehensive vehicle insurance policy would not cover the consumables such as air filters, AC gas, nuts and bolts that are damaged due to an accident; having a consumables cover could help you pay for these consumables in case of a claim. The higher the vehicle's value, the higher the consumables cost, which is to be replaced in case of damage.

    • Key Protection

      During a robbery or attempt to rob a vehicle, the first that would get damaged is the vehicle's lock. The cost of the lock would be high, and it needs to be paid completely in a comprehensive policy. The damages to keys are also not covered under the comprehensive policy unless it is damaged along with the vehicle. Key protection covers the loss or damage to the key and lock of the vehicle due to any accident or forceful entry, such as robbery or theft. For high-end cars, the cost of the key would run into lakhs as it is highly sophisticated and needs to be covered against perils. Only some vehicles get their keys replaced by the manufacturer, as the local-level manufacturing of the key would not be possible. It would also hamper the warranty with such acts. For this reason, it is important to take a key protection cover if your vehicle is high-end or if replacing the key and lock is costly. Under this cover, a maximum of Rs.3 Lakhs would be paid to the insured for each claim during the policy period, with the maximum number of claims limited to 2 during the same policy year.

    • Invoice/ Vehicle replacement Cover

      Invoice cover, or as it is generally called, vehicle replacement cover, provides the insured with the invoice value of the vehicle in case of total damage or theft of the insured vehicle. When a vehicle is damaged due to an accident and the repair cost exceeds 75% of the IDV value, the invoice value would be paid to the insured. In addition to the invoice value, the vehicle's registration charges and road tax are paid. Vehicle replacement cover would come into play only at the time of total damage or theft. It is important to note that this cover is available only for 2-3 years from the vehicle's registration date. In the case of partial loss, the depreciation cover would help the insured with claim settlement, but in the case of a total loss, the invoice cover would help the insured. Invoice cover would provide a higher claim when compared with the Zero depreciation cover in the case of a new vehicle; this is because the zero depreciation cover works on the IDV, which is far less than the invoice value of the vehicle.

    • Windshield glass cover

      The windshield is a glass window at the front of the vehicle, protecting the driver from wind and providing a view for driving. The windshield is made of glass and is susceptible to damage due to accidents such as falling objects, flying objects while driving, etc. Windshield replacement can be done under the comprehensive vehicle insurance policy, but the No claim bonus accrued would be lost. To prevent such situations, insurance companies have launched windshield glass cover, which covers the cost of replacement of the windshield damaged due to an insured peril. This cover protects the hard-earned no-claim bonus of the insured even after claiming the windshield damages. This add-on has a catch: if the vehicle is not repaired at a garage of the insured's choice, it would be treated as a separate claim, and no claim bonus would be affected.

    • Voluntary deductible cover

      Deductible or excess is the amount the insured would agree to bear in case of a claim. There are two types of deductibles; compulsory and voluntary. The IRDA decides on A compulsory deductible, which is mandatory for every claim under the motor insurance policy. In contrast, the insured can choose a voluntary deductible which is not mandatory. Under the voluntary deductible cover, the insured can choose the deductible amount they wish to bear during claim settlement. The higher the voluntary deductible, the lower the premium due to higher discounts. A deductible is shifting a part of the responsibility to the insured at the time of claim settlement.

    • RoadSide Assistance cover

      There could be situations when your vehicle breaks down suddenly on the road in the middle of nowhere. Such situations can be handled by a roadside assistance cover which assists the insured in case of any mishap while traveling. Insured can call the toll-free customer care of the insurance company to avail of roadside assistance services such as battery jump-start, tire replacement, fuel delivery, alternate accommodation, travel arrangement or taxi service to a nearby hotel etc. Insurance companies would arrange a mechanic or a person to help you with the breakdown if the roadside assistance add-on is opted for. The cover would also deliver spare keys to the insured from their home to the breakdown location. Towing service to the nearby garage can be availed under the roadside assistance cover. The premium for roadside assistance cover would be very less when compared to the other add-ons, and it is recommended to have this cover.

    • Daily allowance cover

      The daily allowance cover is an add-on cover under motor vehicle insurance, which provides the insured with a daily allowance for commuting if the vehicle is under repair in the garage for more than 1 or 2 days. This is also known as the conveyance benefit, provided to the insured to commute from office to home or any other place while the car is being repaired. The conveyance amount would vary from one insurer to another.

    • Loss of baggage cover

      There may be instances when you lose the baggage you left in the vehicle. Loss of baggage cover compensates the insured in case of loss of total baggage due to an accident or theft. Baggage includes clothes, toiletries, perfumes, bags and suitcases carried during the journey. Certain exclusions under this cover include a claim not payable if the baggage is left unattended in the vehicle without closing windows, loss of money, securities, bonds, bills of exchange, valuable items such as diamonds, gold, silver etc.

    • Spare car clause

      Spare car clause provides the insured with an allowance to avail of the services of car travel during the period the insured vehicle is being repaired in an authorized garage or workshop. The insured would be allowed to travel in a rented car, or the insurance company would provide a spare car under this clause. In most cases, the insurer would provide a daily allowance if the vehicle is in the garage for more than a day, and the benefit is payable for a maximum of a certain number of days as decided by the insured in the policy.

    • No claim bonus protector

      No claim bonus is the benefit available to the insured in the discounted premium for not making claims during the previous policy period. No claim bonus (NCB) ranges from 0% to 50% with every claim-free year, and in case of a claim, it drops to 0% and again increases to 50% with every claim-free year. One claim can set you back to 0% NCB, and the renewal premium would increase drastically depending on where you are on the NCB slab. To overcome this issue of losing NCB at the time of claim, insurance companies have introduced no claim bonus protector cover, which works in two ways; one is the NCB would be intact even after 1 or 2 claims in a policy year, and the other is NCB would fall to the next lower slab in case of a claim. In any case, the insured could retain their no-claim bonus even after availing of claim benefits. This add-on would be applicable only for a limited number of claims during the policy period.

    • Tyre cover

      Tyres are an important part of the vehicle and are costly. Any damage to the tires will be covered under the comprehensive policy if they are damaged together with the vehicle. The comprehensive vehicle insurance policy does not cover stand-alone damage to the tire. To address this issue, insurance companies have introduced the tire cover, which compensates the insured in case of loss or damage to the tires due to an accident. It covers the loss or damages to the tire due to an accident and provides for repairs or replacement of the tire up to the sum insured limit. There can be certain instances where only the tire is damaged, and the vehicle is intact and other instances where the tire damage could lead to vehicle damage. The latter is covered under the comprehensive policy, but the former is covered only if there is a tire protection add-on under the comprehensive policy. The cover is not applicable for old tires, which are worn due to natural wear and tear.

    • Engine Protection cover

      The engine is the vehicle's most important part and must be covered against any mishaps. Engine protection cover compensates the insured in case of loss or damage to the engine due to water ingression or oil leakage. A comprehensive motor vehicle insurance policy would not cover the stand-alone engine damage due to natural calamities or accidents, thereby requiring an add-on to cover the stand-alone damage to the engine. For instance, during floods, one may have to start the engine of the vehicle and move it to a safe place or drive through water-clogged areas, and in this process, the water would enter the engine and lead to hydrostatic lock, a phenomenon in which the air would get trapped in the engine leading to malfunction of the engine. The hydrostatic lock would prevent the engine from running and, if forced, can damage the engine permanently. Other such damages to the engine can occur when engine oil leaks, leading to overheating the engine and ultimately damaging it beyond repair.

    • Enhanced personal accident cover

      Personal accident cover is mandatory for the owner/driver under the motor vehicle insurance act for a sum of Rs.15 Lakhs, which covers the death or disability of the driver due to an accident while driving the vehicle. PA cover is also available to the passengers traveling with the insured with a sum insured of Rs.2 Lakhs which can be enhanced up to the maximum limit available with the insurance company. The personal accident cover can be enhanced for the paid driver or the passengers by paying an additional premium.

    • Rim Damage cover

      A rim damage cover compensates the insured in case of any damage to the wheel rims due to an insured peril. This cover is similar to the tire protection cover, which operates on a stand-alone basis. If only the rim is damaged while the vehicle is intact, then the claim is not payable under comprehensive vehicle insurance. Still, the claim will become payable if the rim damage cover opts. The number of times one can avail of this benefit would be limited to 4-wheel rims during the policy period.

    How to decide the add-ons?

    With so many add-ons in the market, now the question arises of how to decide the add-ons that could be suitable for your vehicle. Opting for all add-ons would increase your premium, and opting for too few could increase the risk. Hence, it is important to balance the number of add-ons and the premium payable. Let us understand how to decide on the add-ons for your vehicle:

    Availability of add-ons: The first thing to check is the availability of the add-ons with the insurance company you are planning to go with. If the required add-ons are unavailable with that particular company, then there is no point in going with it. For example, you have a vehicle that is 7 years old and looking for a zero depreciation add-on with your comprehensive cover. Suppose company X cannot offer zero depreciation cover but is offering other covers such as roadside assistance, key protection, and baggage cover. In that case, there is no point in going with that company, as zero depreciation cover is the most important in motor vehicle insurance. You need to understand which add-on is important for your vehicle and decide accordingly. There could be add-ons that are irrelevant to you at that particular time but might be required later. So, considering all these thighs, you should decide on the add-ons.

    Requirement of add-ons: The requirement of add-ons for your vehicle also plays an important role in deciding the add-ons to be taken. For example, if you are staying in a low-level area that has experienced floods, you should consider taking zero depreciation and engine protection cover. Engine protection cover would come in handy in case of stand-alone damage to the engine. Similarly, if you are using the vehicle only for limited city travel, there would be less requirement for roadside assistance cover. Certain add-ons are to be considered; zero depreciation and consumables cover, as these add-ons can save you at the time of claim settlement. Key protection cover can be taken if you are staying in an area that has a considerable number of theft or robbery claims reported or if you are parking your vehicle in the open.

    Premium payable: The other way to decide on the add-ons is to consider your premium paying ability. Opting for add-ons would increase the premium considerably, and you should be able to decide which add-ons would come in handy and select the add-ons accordingly. One should consider their budget and purchase the add-ons failing, which would cost more than required.

    Age of the vehicle: The age of the vehicle should also be considered while selecting the add-ons. For example, vehicles aged more than 7 years would not get zero depreciation cover which is the same as vehicle replacement cover, which would not be given to vehicles aged 3 years or more. One should consider their vehicle age and divide the add-ons accordingly; the higher the vehicle age, the lower the requirement for more add-ons. Required add-ons, such as zero depreciation and consumables, should be selected as long as the insurance company offers them.

    Frequency of drives: The frequency of taking out a vehicle for driving should also be considered when selecting the add-ons. If you are a frequent driver traveling to different parts with different risk profiles, you should select the add-ons accordingly. For instance, if you travel to water areas, hilly areas, plain areas, or areas with high robbery cases, you should opt for add-ons that can provide you complete protection when traveling to any of these locations.

    Location of the vehicle: The location also plays an important role in deicing the add-ons. For instance, if you are parking your vehicle in the open or on the street, there are high chances of accidents or theft. So, check the risks in your location and then decide on the add-ons. If you stay in an area with adequate security, you can skip a few add-ons.

    For more information on the add-ons in motor vehicle insurance and advice on selecting the best add-ons for your vehicle, please book a call with Ethika insurance broking and get assistance from our motor insurance experts.