Car insurance jargons can make a policy complicated and difficult to understand. And as you must already know, signing a document without understanding the meaning of the terms mentioned, is a bad practice and can leave you unhappy.
In this article, we will simplify the top 12 car insurance jargons for your reference.
The insurance industry is mainly divided into two types – life and general insurance (non-life). Insurance policy for your car or bike falls under motor insurance that is a part of general insurance. Other than motor insurance, health, travel, home, fire insurance, etc. form parts of the general insurance industry. You can buy a motor insurance policy online.
Third-party Car Insurance
This is one of the two types of car insurance policies available. Buying third party car insurance is mandatory by law in India. It is required to buy at-least this type of policy to be able to drive legally in India. Third-party Car Insurance is the most basic type of insurance and offers limited coverage. It will cover you against third-party property damage, accident and injuries and third-party legal liabilities. You can also buy a personal accident cover with this policy.
Damage to the insured car is called own damage.
Comprehensive Car Insurance
This is a type of car insurance policy that offers extended coverage while including benefits offered by a third-party policy. Under a comprehensive policy, the policyholder receives coverage for own damage. Also, one can buy add-ons i.e. extended coverages with this type of insurance. Comprehensive car insurance offers coverage against theft, fire, natural calamities, man-made calamities, etc.
Buying comprehensive vehicle insurance online will save your time as well as money.
A claim is an intimation to the insurer about a specific incident. When a claim is raised, the insurance company begins investigating the incident and if the claim is approved, the settlement process begins. When the claim settlement process is complete, the policyholder is paid the respective claim amount. Nowadays, you can raise a motor insurance claim online.
The person in who’s name a policy is issued is called the insured. He/she might be the owner of the vehicle. An insurance company is liable to pay the compensation to the insured when a claim is settled successfully. An insured may also be referred to as a policyholder.
An insurance company that has issued the policy is collectively called as an insurer. The insurer is responsible for carrying out the claim process and provide related services to the insured under the terms and conditions of a policy. You can read about vehicle insurance terms online.
An insured vehicle is deemed as total loss if it gets damaged beyond repair due to a calamity or major accident. Another situation in which a car can be considered as total loss is in case of theft.
IDV stands for Insured Declared Value. It is the approximate current market value of the insured vehicle. IDV is supposed to be decided by the policyholder while buying or renewing the policy. If you are buying vehicle insurance online, setting the IDV is easier than the offline process. It is a reference point for the insurer in case of total loss and the insured will be paid an amount approximately equal to IDV in this situation.
A deductible is an amount that the policyholder pays at the time of claim. There are two types of deductibles – compulsory and voluntary. A policyholder can choose to opt for voluntary deductible. It is important to note that opting for a voluntary deductible can result in a lower claim amount.
NCB stands for No Claim Bonus. This is a discount awarded at the time of renewal to the policyholder in case he/she does not raise a claim is the previous policy period. NCB can be as high as 50% discount on the premium if any claims are not raised for 5 consecutive policy years. Thus, it is regarded as the highest discount one can get on the car insurance premium.
Zero Depreciation Car insurance
This is an add-on that can be purchased along with a comprehensive car insurance policy. Each year due to depreciation, the value of a car reduces. Since an insurer counts depreciation in the claim amount. Due to depreciation the claim amount can drastically reduce, however, if one gets a Zero Depreciation Car insurance the insurer will not consider depreciation while calculating the claim amount.
You can use this article for reference while understanding your car insurance policy in detail. In case you are confused about any insurance-related jargons, feel free to comment in the next section. We will get back with an easier version of the meanings for better understanding.
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