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Layman's Guide to Understanding Car Insurance

Published on October 4, 2019. EST READ TIME:3 MIN

Layman's Guide to Understanding Car Insurance

A car is a prized possession and can give you the freedom to go anywhere, anytime you want. But you need to ensure it as well as yourself against common risks. As per law, you need to buy a third party only policy for your car. Car insurance can be helpful as it provides financial assistance to vehicle owners in case of accidental damage, theft, or injuries. But industry terms can make car insurance seem more complicated than it is and make it difficult for a layperson from buying the right coverage for a vehicle.

Here's a simple guide to understanding car insurance.

Types of Car Insurance

Comprehensive insurance covers third-party liability as well as other types of damage to the car. It will cover theft, damage due to accidents, fire, explosions, or natural calamities, and third-party liability.

Third-party liability covers any damage caused by your car to a third-party vehicle or property; and injuries to a third-party person.

Exclusions –

Every car insurance policy comes with some things excluded from the plan. However, you can include a few of them in your plan by buying add-on covers.

For instance Depreciation and electrical or mechanical breakdowns are not covered in car insurance and can be covered by way of add on covers.

Damage and injuries caused due to illegal driving are not covered by car insurance. Further, driving without a valid license or under the influence of alcohol and other banned substances is also not covered.

Add-On Cover Options

Comprehensive cover may not be sufficient for every car owner. You may want to protect your vehicle even more. For this reason, insurance companies offer add-on covers. You can buy one or more add-on covers along with your comprehensive car insurance policy. You will need to pay an additional premium for each add-on cover separately.

Types of add-on covers you can buy for your

Zero depreciation – The insurer will pay your claim amount without taking the vehicle's depreciation into account.

Emergency assistance – The insurer will cover your vehicle in case you need minor roadside repairs, lost key assistance, tyre changes, battery jumpstarts, towing etc.

No claim bonus (NCB) protection – Every claim-free year gives vehicle owners benefits of lower premiums as a bonus from the insurer up to 5 years. But in case your vehicle gets damaged in the 4th or the 5th year due to external or other factors, you may end up losing the entire bonus amount. But you can protect it by buying an add-on cover to protect your NCB.

Engine and gearbox protection – This add-on cover is to protect your vehicle's engine or gearbox due to waterlogging or flooding.

Return to invoice – If the car sustains total damage or is stolen, you will only get the claim amount as per the Insured Declared Value (IDV), which is equivalent to the current market value of the same car make and model. But if you buy this add-on cover, you will also be paid the difference amount between the IDV and your car's original invoice value.

Now that you understand the different aspects of car insurance, choosing one should be easy. Just remember to compare what multiple insurers offer and read the terms and conditions before making a choice.

Disclaimer : The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales

This blog has been written by Mr. Mukesh Kumar recommends "getting your two wheeler insured from HDFC ERGO, a brand serving more than 1 crore+ customers. With overnight repair services and more than 6,800+ network garages, you can be assured of help in event of any damage to your vehicle

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