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Primer on auto policies

More than one lakh people die every year in road accidents in India. Fatalities in road accidents are growing by 4 per cent a year. It pays to have a sound motor insurance policy to cover damages in addition to insurance cover for life and health, reports Falaknaaz Syed.

autos Updated: May 04, 2009 00:02 IST
Falaknaaz Syed

More than one lakh people die every year in road accidents in India. Fatalities in road accidents are growing by 4 per cent a year. It pays to have a sound motor insurance policy to cover damages in addition to insurance cover for life and health.

A motor car insurance policy consists of two sections – an ‘own damage’ cover and a ‘third party liability’ cover. You may choose to buy both these policies separately or instead go for a comprehensive motor policy that will combine both aspects. Under the Motor Vehicles Act, all motor vehicle owners are mandated to have a ‘third party liability’cover.

Inside comprehensive cover

A comprehensive motor policy covers loss or damage to the insured vehicle on account of accidents, fire, floods, terrorist activity, malicious acts, lightning, self-ignition, explosion, burglary and theft. It also covers damages by accidental, external means while in transit by rail/road, inland water, lift or air, in addition to legal liabilities required by law.

Some insurers offer policies at cheap rates but cover only a few risks. You must make sure that you get covered for all required aspects.

Insurers also offer personal accident cover and a third party liability cover under a comprehensive motor policy. The third party cover protects you against legal liabilities arising from accidental damages causing any permanent injury or death of a person or any damage caused to a person’s property.

Sum insured

The vehicles are insured at a fixed value called the Insured Declared Value (IDV) which is calculated on the basis of the manufacturer’s listed selling price of the vehicle in addition to the listed prices of the accessories after deducting the depreciation for every year.

Factors that decide your premium

The parameters to decide the premiums that you pay varies between insurers. For an own damage cover, most insurance companies charge 3 per cent of the IDV but in addition take into account parameters such as cubic capacity of the engine, the vehicle’s age, place of registration, your age, profession, make and model of your car, seating capacity and even the place of your residence which gives an idea to the insurer on the location where the car is driven. In case these factors are favourable, insurers increase the discounts in ‘own damage’ covers.

For instance, HDFC Ergo General Insurance has begun offering an additional 10 per cent discount if the person is above 50 years of age or in a white collar profession. If both factors apply, the discount adds up to 20 percent. But the renewal premium increases if a claim has been made already.

The premium for a ‘third party liability’ policy depends on the cubic capacity and is uniform across companies (see table).

Where a claim is not honoured

There are exceptions where a policy is not applicable due to the following factors.

1. Consequential loss, wear and tear, mechanical or electrical breakdown, failures or breakages.

2. Damage to tyres, unless the motor vehicle is damaged at the same time , in which case the liability of the insurer is limited to 50 per cent of the cost of replacement.

3. Any accidental loss or damage suffered when the driver is under the influence of liquor or drugs.

4. Cost of part/s and allied labour, failure of which led to an accident.

Discounts

For every claim-free year, you earn a minimum discount of 10 per cent . (But the accumulated no-claim bonus cannot exceed 50 per cent). You can transfer your existing 'No Claim Bonus' when you shift your policy to another insurer.

You can also get discounts if you are a member of a recognised automobile association, if an anti-theft device is installed in your vehicle. Special discounts exist for cars owned by physically challenged people and for vintage vehicles.

Finally, for proper assessments, do check the number of garages your insurer has a tie-up with, and the services they offer.

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