Car insurance is a must for every car owner in India, but it is one of the most confusing parts of ownership. Policy documents are full of technical terms that can be difficult to understand, especially if you are buying insurance for the first time. Nevertheless, knowing some basic terms can go a long way in helping you choose the right cover and avoid unpleasant surprises at the time of claim. Here are five common car insurance terms explained in simple terms.
Car insurance terms you should know about:
-deductible
One term you will often encounter is deductible. This is the amount you agree to pay out of your own pocket every time you file a claim. For example, if your deductible amount is Rs 500 and the repair bill comes to Rs 2,000, you pay the first Rs 500 and the insurer pays the remaining Rs 1,500. Choosing a higher deductible usually lowers your premium, while a lower deductible increases it. It’s a balance between saving money upfront and paying more during a claim.In India, a mandatory deductible amount is fixed by IRDAI in every car insurance policy. It is usually Rs 1,000 for cars below 1,500 cc and Rs 2,000 for cars above 1,500 cc. Additionally, insurers may offer voluntary deductibles, which reduce the premium if you opt for a higher sum.
-premium value
The second important word is premium. This is the amount you pay to the insurance company to keep your policy active. It can be paid annually or in installments. The premium depends on several factors such as your age, driving history, city, type of car and even how old the vehicle is. Simply put, the higher the risk, the higher the premium. Knowing what impacts your premium helps you understand why two people with the same car might pay different amounts.
-liability coverage
Liability coverage is a term that every car owner should be familiar with, as it is mandatory by law in India. This cover protects you financially if you cause damage or injury to someone else. This includes bodily injury liability, which takes care of medical expenses and related costs, and property damage liability, which pays for damage caused to another person’s vehicle or property. However, it does not cover damage caused to your own car.
-comprehensive coverage
Comprehensive coverage is optional, but strongly recommended, especially for new or expensive cars. This type of insurance protects your vehicle against damage that does not involve a collision. This includes damage caused by theft, fire, flood, earthquake, vandalism and even animals. If your car is financed or leased, insurers or lenders often make comprehensive cover mandatory.
-Collision Coverage
Finally, there is collision coverage. If your car is damaged in an accident, this part of the policy pays for its repairs, regardless of who is at fault. This comes in handy when your car collides with another vehicle, any object or overturns. Although not mandatory, collision cover is useful for newer cars, where repair costs can be high. However, in India, collision cover is not usually sold as a separate policy. This is part of comprehensive insurance.
(TagstoTranslate)Car Insurance Terms(T)Liability Coverage(T)Comprehensive Coverage(T)Collision Coverage(T)Car Insurance Deductible(T)IRDAI
