Buying a car? 3 insurance queries to ask

Deepti Bhaskaran, Hindustan Times
New Delhi
First Published: 21:56 IST(26/10/2012)
Last Updated: 21:59 IST(26/10/2012)
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Before you can drive out your new car, you find yourself signing up for a car insurance policy. The excitement of driving home a new car wipes out mundane thoughts about the policy and what it does. The document is hunted for and pulled out the minute you need a claim. Answers to three questions will keep you ahead while making a claim.

What does it cover

A third-party liability cover is the basic form of car insurance. This is a mandatory cover that you need before you can take your car out of the showroom. The policy covers you in case the insured vehicle causes damage to life or property of a third party.

In addition to this, a comprehensive car insurance policy also throws in other covers such as own damage (OD) that insures your vehicle against theft or damage, and passenger cover that insures the lives of the passengers.

The structure of a comprehensive policy stays the same across insurers but what differentiates one policy from another are the add-on benefits. A few need mention.

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For instance, the depreciation cover makes a lot of sense. Insurers don't pay the cost for replacing certain parts of your vehicle but only the depreciated value. This cover will pay the remainder to replace these parts.

Another cover that covers depreciation is called return to invoice. In case of complete damage or theft of the car, this cover pays you the amount a new car would cost instead of just paying the depreciated value of the car; in insurance parlance it is called the insured declared value (IDV). But these add-on benefits come with fine print.

"The older the car, the higher is the depreciation," said KN Murali, senior vice-president, head-motor, Bharti AXA General Insurance Co. "This will translate into a higher replacement cost. For this reason, most of these policies come for three years and not more than five years."

Other than that they are usually available for a specific number of claims in a year. You need to be aware of the fine print.

"Usually the premium ranges from 10% to 30% of the OD premium," said Madhukar Sinha, national head-personal lines, Tata AIG General Insurance Co.

What claims are paid

The first thing to understand about a car policy is that it does not pay the entire claim amount. In case of own damage cover, the policy comes with a deductible. A deductible is that amount of the claim that needs to be borne by the person who buys the cover.

For instance, for a 1,500 cc vehicle, the deductible is Rs. 1,000. That means any claim worth Rs. 1,000 will not be entertained. In case of claim above that you will still need to pay out the first Rs. 1,000.

After this, the policy will only pay the depreciated value of certain body parts. You will need to bear the extra cost for replacing them. An add-on depreciation cover will take care of this cost.

Additionally your car insurance policy will also not pay for any improvement or for consumables and will not pay for any negligence on your part.

"In case of a third party, an insurer has three defences: if the driver doesn't have a valid driving licence, if he is driving under the influence of alcohol or if the car does not have a fitness certificate," said Murali.

How to claim

Under an own damage policy, there are two kinds of claims that you can make: in case of damage to your car and in case of theft.

In the first case, the most important step is to inform your insurer as soon as possible. Also it's good to take pictures to show the surveyor.

After you take your car to a networked garage for cashless settlement, a surveyor will evaluate the cost of repairing the vehicle and settle the bill directly.

In case the garage does not have cashless facility, you will need to pay the bill yourself and then claim it later.

In case of a theft, claims are settled usually after many months. First, you need to inform the police station in your area and register a first information report (FIR).

The cops will take about 90 days to hunt your car down, failing which they will issue a "not traceable" report. Give that report to your insurer along with other documents such as your policy and registration certificate.

The insurance company will then also make some enquiries. The insurer will then ask you to fill up transfer forms that will effect a transfer of the vehicle in their name and you will need to hand over the car keys to them. Again you could lose another month or two here.

Other claims

In case of a third-party claim, the first step is to bring your insurer into the loop as soon as possible. Your insurer will defend you in the court, failing which he will settle damages.

You can help the insurer by taking photographs of the accident and by taking down the phone number of any witness. In case of a passenger cover there are two kinds of covers. "A personal accident cover insures all passengers of the vehicle.

In case of a paid driver, the insured can take the workmen's compensation cover," says Rahul Aggarwal, director, Optima Insurance Brokers Pvt Ltd.

The benefit under a personal accident policy as part of the car insurance policy is capped at Rs. 2 lakh.

The insurer will need documents such as an FIR and post-mortem report to settle the claim.


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