Motor Insurance Policy Terms You Must Know Before Buying One
As per The Motor Vehicle Act, 1988 all car owners in India must compulsory buy the Third-party car insurance. You can also get additional benefits like extra coverage for covering damage caused to the owner of the insured car, you may opt for comprehensive car insurance plans available. All these types of plans, riders/add-ons, quotes can be quiet a task to understand while deciding an insurance plan. This gets more complex with all the technical terms used in the insurance documents. Understanding the policy properly requires you to know these terminologies.
We have simplified a few motor insurance policy related terminologies:
- Insured Declared Value (IDV) – Insured declared value (IDV) is the present market value of the insured vehicle. It is calculated based on the age of the car insured and its rate of depreciation. In case your vehicle gets lost or stolen, then the insurance company has to pay you the amount equivalent to the IDV.
- Own Damage Premium (ODP) – Own damage premium (ODP) is the premium you pay to avail the insurance equivalent to the IDV of your insured vehicle. ODP forms a significant part of your premium. It secures you against the unavoidable events such as floods, earthquakes, tornadoes, etc. and human-made disasters like fire and explosions.
- Zero Depreciation Cover – Usually motor insurance policy claims deduct the depreciation on replaced parts of the insured car. Although, if you opt for Zero depreciation cover it will settle the claim excluding the depreciation on replaced parts. Which implies that you get higher claim amount than the standard insurance policies.
- No Claim Bonus (NCB) – This is one of the most common car insurance terms. No claim bonus (NCB) is the discounted premium that you get if there is no claim raised from you that is the first-party or third-party in a year. It is basically the reduced premium that you pay on renewing the motor insurance policy.
- Third-Party Cover – According to Indian law, every car owner must buy third-party insurance. The third-party cover secures the owner of the insured vehicle against the cost of damage caused to the third-party in terms of death, injury or harm to property.
- Comprehensive Policy – A standard car insurance policy covers the loss caused to the third party. Whereas the Comprehensive policy covers loss caused to both third-party as well as first-party that is the insured person. This type of policy covers damage caused to the insured vehicle due to natural calamities like a tornado, flood, etc.
- Cashless Claim – Cashless insurance is rapidly gaining importance. This type of policy settles the claim directly with the garage. Which means you don’t have to shed extra money from your pocket in repairing the vehicle.
These terms are the basic ones which you will come across while buying a motor insurance plan. Although, if you find difficulty in understanding any terminology, you can contact an insurance agent for better understanding.