Understanding common car insurance terms helps you choose the right cover, avoid surprises during claims, and make informed decisions while buying or renewing your policy.
1. Driving License
A driving licence is a legal authorisation issued by the RTO that allows you to drive a specific type of vehicle on Indian roads. Driving without a licence or with an expired licence can lead to claim rejection.
2. RTO
The Regional Transport Office or the RTO is the official government body which registers all vehicles in the Indian subcontinent as well as issues driving licences. It maintains records of vehicle ownership, registration details, and licence
validity.
3. Third Party Liability Coverage
This is the mandatory car insurance cover required by law. It protects you against legal liabilities arising from injury, death, or property damage caused to a third party by your vehicle. It does not cover damage to your own vehicle.
While there is no upper limit on coverage for third party death or injury, the compensation for damage to a third-party property and vehicle is limited to a maximum of ₹7.5 lakhs.
4. Comprehensive Coverage
A comprehensive car insurance policy covers third party liabilities and damage to your own car due to accidents, theft, fire, or natural calamities. It also allows you to add optional add-on covers for wider protection. It is not mandatory
but advisable to opt for a comprehensive plan.
5. Car Insurance Premium
The premium is the amount paid to the insurer for coverage during the policy period. Paying premiums on time keeps the policy active. The premium amount depends on factors such as IDV, car model, location, claims history, add-ons chosen, and
policy type.
6. Insured Declared Value
IDV is your car’s current market value after depreciation. It is the maximum amount of money that the insurer would pay as a claim in case of a total damage or loss of the car in an accident or theft. Since depreciation increases every
year, insured declared value of your car reduces over time.
7. Deductibles
In motor insurance, deductibles are a part of the claim amount the insured person will have to pay during claim settlement. The insurer pays the rest of the claim amount. There are two types: voluntary and compulsory deductible.
• Compulsory deductible is fixed by regulation
• Voluntary deductible is chosen by you to reduce premium
Opting for a higher voluntary deductible lowers premium but increases your share during a claim.
8. No Claim Bonus
No Claim Bonus in car insurance is a reward given for not making any claims during a policy year. It is offered as a premium discount at renewal and can go up to 50% over consecutive claim-free years. NCB belongs to the car owner, not the
vehicle, and can be transferred when you buy a new car.
9. Cashless Garages
These are authorised service centres partnered with the insurer. When you repair your car at a network garage, the insurer directly settles the approved repair cost with the garage. You only pay deductibles or non-covered expenses.
10. Add-on Covers
Add-on covers are optional benefits that enhance your comprehensive car insurance policy. Popular add-ons include zero depreciation, engine protection, return to invoice, roadside assistance, consumables cover, and NCB protection.
11. Personal Accident Cover
Personal Accident Cover provides financial protection to the owner-driver in case of death or permanent disability due to an accident. As per IRDAI guidelines, a minimum cover of ₹15 lakh is mandatory. This cover can be extended to
include other individuals too.
12. Total Loss
A car is declared a total loss when repair costs exceed a defined percentage of its IDV or if the vehicle is stolen and not recovered. In such cases, the insurer pays the IDV amount after deducting applicable deductibles.
13. Endorsement
An endorsement is an official change made to your policy during its tenure. This can include updating personal details, adding accessories, correcting registration information, or changing address details.
14. Anti-Theft Device
An anti-theft device is a security system installed in your car to prevent theft, such as an engine immobiliser or alarm system. Cars fitted with IRDAI-approved anti-theft devices are considered lower risk by insurers. They may qualify
for a discount on the car insurance prices.
15. Consumables Cover
Consumables refer to items that are used up during vehicle repairs and are usually not covered under a standard car insurance policy. This includes engine oil, brake oil, coolant, nuts and bolts, grease, washers, and similar items.
A consumables add-on cover can ensure these costs are reimbursed during a claim.
16. Third-Party Property Damage (TPPD)
This refers specifically to the damage caused to another person’s vehicle or property. Compensation for TPPD is capped at ₹7.5 lakh as per current regulations.
17. Break-in Insurance Inspection
If a policy expires and is not renewed on time, the insurer may inspect the car before renewal. This process checks for existing damages before activating fresh coverage.
18. Subrogation
After settling a claim, the insurer may legally seek to recover the amount from another party responsible for the loss. This process is known as subrogation and does not involve the policyholder.
19. Downtime Cover
This add-on compensates for daily transport costs if your car is under repair after an accident to help reduce inconvenience.
20. IDV Depreciation Schedule
Insurers follow a standard IRDAI depreciation table to calculate IDV based on vehicle age. As cars get older, IDV reduces, which impacts both premiums and total loss payouts.
| Age of Vehicle | Standard Depreciation % |
|---|
| Up to 6 months | 5% |
| More than 6 months up to 1 year | 15% |
| More than 1 year up to 2 years | 20% |
| More than 2 years up to 3 years | 30% |
| More than 3 years up to 4 years | 40% |
| More than 4 years up to 5 years | 50% |
21. Salvage Value
Salvage is the remaining value of your car after severe damage or total loss. Insurers deduct the salvage value from the claim payout if the car is not handed over to them.
22. End of Life (EOL) Vehicle
In India, private petrol cars older than 15 years and diesel cars older than 10 years may be categorised as EOL based on local regulations (like in Delhi NCR). These vehicles may face restrictions and different insurance considerations
23. Surveyor
In case of an accident, the insurer sends a surveyor to the accident spot or the garage to inspect the car, take photos, and record details. This helps the insurer verify the cause of damage, estimate repair costs, and avoid disputes
later during claim settlement.
24. Free Look Period
The free look period is a short window after you receive your policy during which you can review the terms and cancel the policy if you are not satisfied — and get a refund of the premium paid, subject to permitted deductions.
25. Consequential Loss
Consequential loss refers to indirect financial impacts that arise as a result of a damage event, such as loss of business income or secondary effects. These are usually not covered under a standard insurance policy unless separately
insured.
26. Grace Period
The grace period is the extra time after your car insurance expiry during which you can renew the policy without losing benefits like No Claim Bonus, though claims are not allowed in this period.
27. Geographical Limit
The geographical limit is the specified area (usually within India) where your car insurance policy provides coverage — losses that happen outside this region may not be covered unless the policy states otherwise.
28. Named Driver
This refers to a specific person listed in the policy who is authorised to drive the insured vehicle. Claims may be denied if an unlisted or unlicensed driver was operating the car during an incident.
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