Finance

Published: July 17, 2023
Updated: July 17, 2023

Mastering Monsoon: 6 Essential Car Insurance Terms You Should Know

As the monsoon season brings heavy rains and potential damage to vehicles, it is crucial to have a comprehensive understanding of car insurance terms. Familiarising yourself with key terms such as Insured Declared Value (IDV), deductibles, and add-ons like zero depreciation and engine protection can prove invaluable when selecting a car insurance policy. This article explores these essential terms to empower you with the knowledge needed to make informed decisions and protect your vehicle during the monsoon season.

1.Insured Declared Value (IDV):

Understanding the Maximum Claim Amount Insured declared value (IDV) represents the maximum amount an insurance company will pay in the event of a total loss or theft of your car. Similar to the sum assured in health or life insurance, the IDV is calculated based on the car's ex-showroom price and depreciation. With each passing year, as the car depreciates, the IDV also decreases. The IDV is disclosed in your car insurance policy schedule, along with your policy premium.

2.Third-Party Cover: Essential Protection for Damages

A third-party cover is a mandatory component of any car insurance policy. It provides coverage for damages caused by your car to a third party. This includes damage to other vehicles, property, and even injuries or death resulting from a car accident involving you. It ensures that you are financially protected against liabilities arising from such incidents.

3.Personal Accident Cover for Owner: Ensuring Your Safety

Under car insurance regulations set by the Insurance Regulatory and Development Authority of India (IRDAI), every car owner must have a personal accident cover of Rs 15 lakh. This cover provides financial protection for medical expenses, permanent disability, and death resulting from an accident. You can opt for a higher cover by paying an additional premium if desired.

4.Deductibles: Your Share of the Claim

Deductibles are the amount that the policyholder must pay before the insurance company covers the remaining claim amount. It applies to each claim filed. There are two types of deductibles: compulsory and voluntary. The compulsory deductible is fixed by IRDAI regulations, while the voluntary deductible allows you to choose a higher portion of the repair bill to pay, in exchange for a lower premium.

5. Zero Depreciation: Comprehensive Coverage for Car Parts

Zero depreciation is an add-on cover that ensures the full cost of replacing car parts (without accounting for depreciation) in case of an accident. Without this cover, the insurance company compensates based on the depreciated value of the parts. Zero depreciation cover comes at an additional cost but offers more comprehensive coverage and can be beneficial, especially during the monsoon season.

6.Engine Protect: Safeguarding Against Engine Damage

Engine protect is another add-on cover that provides financial protection for engine repairs or replacements caused by factors other than accidents. It covers damages resulting from water ingression, lubricating oil leakage, gearbox malfunction, and more. Contacting the insurance company promptly in case of engine damage due to water-logging is crucial, as forcing the submerged car can invalidate the coverage.

As monsoon brings potential risks to your vehicle, understanding essential car insurance terms becomes paramount. Being familiar with terms such as IDV, deductibles, zero depreciation, and engine protection empowers you to make informed decisions while choosing the right insurance policy. By securing comprehensive coverage and considering the additional costs and benefits of add-ons, you can safeguard your vehicle against potential damage during the monsoon season.