Most people have a really hard time understanding motor insurance terms and conditions. Most of it is written in highly legal jargon with the use of abbreviations that you just canâ€™t figure out.
To add to that, there are so many policy papers that you have to get through, it can all be a bit overwhelming. However, if you arm yourself with the right vocabulary, it can all be a lot more manageable. As such, weâ€™ve compiled a list of 5 motor insurance terms that you must familiarize yourself with.
- Insured Declared Value (IDV)
IDV is perhaps one of the most commonly used terms in vehicle insurance claims. IDV is the standing market value of your motor vehicle. Furthermore, it refers to the maximum sum that an insurer would pay for a vehicle insurance policy. As such, if your vehicle gets damaged or stolen, this is the maximum value you can claim for it. You should ideally seek an IDV thatâ€™s equal to or more than your carâ€™s value so that you donâ€™t end up with a lower compensation.
- Zero Depreciation Cover
While making motor insurance claims, most insurance policies take a depreciation on the parts of the vehicle that have been replaced. However, you can avoid this by getting a Zero Depreciation cover. In this case, there wonâ€™t be any depreciation on the replaced parts. As such, youâ€™ll get a higher claim amount. This cover, however, only applies for the initial few motor insurance claims. As such, even though it leads to a higher premium, you should opt for it as it would lead to a much higher compensation.
- Own Damage Premium
This is the premium that you would have to pay to receive an insurance cover thatâ€™s equal to the Insured Declared Value. Itâ€™s a significant part of the total car insurance premium. The Own Damage Premium would also insure your vehicle against damages and events that you donâ€™t have control over. This may include earthquakes, fires, and even explosions. However, this ODP is highly relative to various factors such as the car model, the location itâ€™s used in, etc. As such, you should clearly ask about all the determining factors.
- No Claim Bonus (NCB)
No Claim Bonus is a discount that youâ€™re eligible for if youâ€™ve gone through the previous year without making any claims. Itâ€™s a kind of bonus you get for using your vehicle carefully. As such, when youâ€™re renewing the policy, youâ€™ll have to pay a lower premium than before. Furthermore, these discounts can be quite significant. The discount usually starts at around 20% for the second year and increases to about 50% for the sixth year. As such, itâ€™s wise to avoid making claims for small incidents.
- Third Party Cover
Third Party Cover protects the owner of the vehicle against any financial liabilities due to death, injuries, or property damage to a third party. In this case, the beneficiary of the claim would be a third-party individual. As such, the victim can file for the third party claim, and the insurer would have to pay. Third Party Cover is mandatory under Indian Law.
Well, these are 5 of the most commonly used car insurance terms that you should be familiar with. Hopefully, youâ€™ll be more confident now about making your policy purchase decisions.