It is important to understand the various details of the car insurance policy so that you have complete knowledge about its features. This will be useful in future when you have to make claims and you will know what coverage is provided by the policy and what is excluded from the coverage. Apart from that, most people who are new to insurance do not understand various things mentioned in the policy document. In this article, you can get a detailed outlook about the crucial elements of auto insurance policy and this will clarify all your doubts regarding the policy. In this way, even a novice can understand all the details of the policy without any hassles. Even after reading this article, if you have any doubts, you can get in touch with a qualified insurance advisor to know about these things in a detailed manner. In the same manner, the insurance agents and customer support executives of your insurance service provider will help you to understand these things in a clear manner.
Sum assured coverage offered by the policy
- This is the most crucial aspect of any insurance policy and you need to check this figure even before you buy the insurance policy for your car. It determines the overall cover available for your vehicle in the event of any damage to the car in future.
- This value depends on the overall market value of the car and it usually depreciates from the beginning after purchasing the vehicle from the showroom. In general terms, the car loses more than half of its original value after 5 to 6 years.
- The coverage offered will be mentioned clearly in the policy and this depends on the age, fitness of the vehicle and its previous track record. If your car has met with any accident in the past, you may get less coverage for the same amount of premium.
- There is no way in which you can alter this figure and it is entirely decided by the insurance company after considering various factors. The premium charged for the vehicle will also depend partially on this figure and you can get some idea about this when you use the car insurance calculator feature available with various online portals.
Tenure of the policy
- The tenure of the policy is the duration for which coverage is offered to the car by the insurance company. Earlier, this was for a duration of one year and customers had to renew the plans every year before the expiry of the policy to have continued coverage from the insurance company.
- However, as per the latest guidelines of IRDAI and the government, consumers need to get mandatory cover of three years when they buy the new car. After this, they can opt for annual renewal or choose the multi-year plans according to their individual requirements.
- The premium charged for the policy will also depend on the tenure and you will have to pay more when you choose more number of years as the tenure of the policy. However, you can get some discount when you opt for multi-year plans and this will also save you from lot of hassles in the long run.
- You cannot change the tenure as per your liking and you have to choose whatever option is offered by the service providers. The policy will be valid only till the last date mentioned in the tenure and you have to renew the policy before the expiry date mentioned in this section.
Types of car insurance policy
There are two different types of car insurance policies and you can choose anything that meets your requirement in the best possible manner. Each one has its own advantages and you have to consider all the factors before you choose the suitable option for your car.
Third party insurance
This is the simple cover that comes at very low cost and you can choose this if your car has lost lot of its market value. It is also a good option when you do not have a big budget for the insurance policy. It covers against legal liabilities due to damage done to third party life or property by your car. In this situation, you need not worry about paying compensation from your pocket and the insurance policy will come to your rescue in this troublesome situation. However, it does not cover the damages done to your own car due to accident or any other sort of damage.
Comprehensive Insurance
This is expensive when compared to other options but offers superior quality coverage for your car. You can expect third party cover as well as coverage for your own vehicle when you choose this plan. The best part is that it offers coverage for own damage and you can even add various additional covers to increase the coverage for your car. In the same manner, you can also customize the plan by choosing the covers as per your needs.
Depreciation effect on the market value of the car
This is a crucial thing that many people are not aware of and you need to understand this carefully to avoid various problems in future. Remember that the original value of the car is what you pay for the car while buying it from the showroom. However, the market value of the car will be slightly lesser than this even on the first day after you buy this vehicle. This is because coverage is not offered by insurance company for various plastic and glass components as the risk is very high. In this way, the car starts losing market value every year at the rate of 10% for the first few years. After this, the rate of depreciation decreases to 5% and you need to understand this value to arrive at the market value of your car. The important point is that the insurance company will provide coverage based on the market value of the vehicle and they will consider the standard depreciation rate while arriving at this figure.
Inclusions of the policy
This indicates what all is covered by the policy and you need to understand them carefully before buying car insurance from the company. Remember that only the things mentioned in this section of the policy document will be covered by the policy and the rest of the things are not covered. If anything is not mentioned in this inclusions section, you can assume that will not get coverage in future. The inclusions may vary depending on the type of policy you choose for your car and it also varies in between service providers and their different policies. For this reason, you need to compare the different plans and check the inclusions of each one to get the suitable policy.
Exclusions of the policy
This indicates what all is not covered by the policy and you need to be aware of these rules. It may vary from one policy to another and what is excluded in one policy may be included in another policy. For this reason, you should specifically enquire about these sections with the insurance company executives before you buy the policy. What is excluded in third party car insurance may be included in comprehensive insurance plans.
Additional covers offered by the policy
When you are willing to buy the comprehensive insurance cover for your car, you will have options to customize the plan by choosing additional covers. This comes at additional cost and you can get superior quality protection for your vehicle. Say for instance, you can choose the zero depreciation cover that will keep the market value of your car intact for the first few years. In the same manner, the theft cover will allow you to get compensation in the event of total loss of vehicle due to theft. There are many other covers in this manner and you can get detailed information about them when you approach the insurance company executives.
Validity of the policy
This is an important thing you need to understand about any policy. The policy will be valid till a particular date that will be mentioned in the policy document. In general, the general insurance plans are valid for one year and life insurance plans are valid for longer duration. The coverage offered by the policy expires after the validity is over and you need to renew the policy to get continued coverage for your car. As per the new regulations of IRDAI, you need to get compulsory car insurance for the first three years for all new vehicles. In this way, you can get multi-year insurance and get coverage for an extended period. The validity is also with regards to geographical parameters and you will get coverage only when you drive the vehicle within the country. If you are planning to take the vehicle out of country, you need to enquire about the coverage being offered in that location. This will help you to avoid many troubles when you have to make claims for damages at a later stage.