All new cars come with a car insurance policy document. And no matter from where you buy a car, there are few things you need to be aware of as far as inclusions and exclusions in a car insurance policy are concerned.
Third-party car insurance cover will pay for any fiscal liability and will also take care of any legal repercussions that arise out of the accident.
Even if you hold a valid license, driving a car out from the showroom right after purchasing it may not always happen. It is important that you get the car insured before you hit the road.
Such an insurance cover may be bought from a general insurance company directly or through the dealer who could have a tie-up with the insurer. No matter from where you buy, here are few things to be aware of as far as inclusions and exclusions in a car insurance policy are concerned.
Inclusions in a car insurance policy
Among the two types of car insurance policies in India, the third-party (TP) car insurance, which is a mandatory a cover, serves to protect the insured from claims arising from a third party, when the insured’s vehicle is at fault. This cover will pay for any fiscal liability and will also take care of any legal repercussions that arise out of the accident. It covers only your legal liability for the damage you may cause to a third party – bodily injury, death and damage to third party property
– while using your vehicle. Third party cover does not pay for repair of damage to your car or if you suffer any car-related injuries.
Elsewhere, a Package Policy or a Comprehensive Policy covers loss or own damage (OD) to the vehicle insured in addition to all the covers provided by a third-party policy. It is the non-compulsory ‘own-damages cover’ part of the comprehensive motor policy that actually pays you in case of damage to or theft of your car. Such a policy provides coverage against loss of or damage to your vehicle caused by accident, theft, fire, explosion, self-ignition, lightning, riots, strikes or act of terrorism, natural calamities.
A Car Insurance Policy May Exclude The Following
At the time of claim, one may not be entitled to the entire claim amount. There are several restrictions and specific exclusions in a car insurance policy. This list includes the following situations in which loss of or damage to your car is not covered.
1. ” The motor policy is a yearly contract and has to be renewed without a break. In case any damage happens post the expiry, the loss won’t be covered.
2. ” If the insured or any other person, with the knowledge and consent of the insured, is driving the car under the influence of alcohol or drugs or any other intoxicating substance.
3. ” If the vehicle was being driven by a person without a valid driving licence.
4. ” Damage to engine as a result of oil leakage.
5. ” In case of violation of car manufacturer’s guidelines for use of car and related failures or breakages.
6. ” Any damage to the car due to war, terror attacks, invasion, foreign enemy action, civil war, mutiny, rebellion, hostilities, radiation or nuclear material/weapons are not covered under a standard motor policy.
7. ” Deliberate accidental loss, that is a loss arising out of an accident or event that was deliberate is also not covered.
8. ” Consequential losses or damages which are a consequence of a certain action resulting by the policyholder or a third-party (whether intentional or by accident) and not an outcome of an uncertain event are not covered.
For instance, engine damage due to hydrostatic loss during monsoons is a common consequential loss. This is because the damage did not happen because of flooding or the rains, instead someone had cranked up the car in a water-logged area. It could be a mistake, an intentional act or an action taken in an emergency situation, however, it won’t be covered by the insurer as the risk was not covered.
9. ” The policy would also not cover any contractual liability that a policyholder may have towards the insured asset, that is, the car. Contractual liability refers to any claim that may arise because of the policyholder entering into a contract. For instance, say the policyholder has pledged his car to someone (say against a loan) for a certain period of time and the car is damaged while being driven by the person to whom it has been pledged. Then any losses due to this damage won’t be covered by your motor insurer. However, if the insured is driving the car, even if pledged to someone, then any damages to the car would be covered subject to the other conditions of the policy.
Restrictions In Car Insurance Policy Not Covered Under A Standard Plan
Certain restrictions in a car insurance policy may still be availed by paying an additional premium. Here are those add-on features in the policy.
1. Zero Depreciation cover
Loss due to normal wear and tear of the car is not covered under a standard plan. This is the reason why at the time of policy renewal, the insured value (technically called the Insured Declared Value (IDV)) of your car is revised downward to adjust for depreciation. By doing this the insurance company is excluding the loss in value that your car has already suffered due to the normal wear and tear in the previous years.
IDV of vehicles over 5 years of age and of obsolete models of the vehicles (i.e., models which the manufacturers have stopped producing) is determined on the basis of an understanding between the insurer and the insured.
Not just the car, the IDV of additional accessories (not included in the manufacturer’s listed selling price of the vehicle), fitted to the vehicle are depreciable. The rate of depreciation for all rubber, nylon/ plastic parts, tubes, batteries and airbags is 50%, while for fibreglass components it is 30%. For damage to tyres, unless the motor vehicle was damaged in the same incident /at the same time, re-imbursement is limited to 50% of the cost of replacement. For glass, depreciation is nil. For all other parts, including wooden parts, the depreciation rate is as follows:
However, adding a Zero Depreciation cover ensures that value of damaged parts is not depreciated before reimbursement and you get full reimbursement for cost of parts replaced. This cover extends to the repairing/replacement cost of fibreglass, rubber parts and plastic. Though, opting for a Zero Depreciation Policy will result in slightly higher premium it is worth considering, especially if your car is less than 5 years old.
2. Invoice Cover
For own damages, no matter how big your loss is, the maximum that your insurer is liable to pay you is the IDV of your car as specified in the policy subject to deductibles. The IDV is the current market value of your vehicle on the basis of manufacturer’s listed selling price of the brand and model. It is provided by the insurer in case of theft or total loss of vehicle. A vehicle will be considered to be a total loss, where the aggregate cost of retrieval and / or repair of the vehicle subject to terms and conditions of the policy exceeds 75% of the IDV.
However, even in case of total loss, where you get full IDV, the settlement amount is often much less than what you had actually paid for the car. Thus, what you get from your insurer in case of theft/total loss in a standard policy is well below the cost of buying a new car of the same or similar make and model again. Adding an Invoice Cover to your standard policy makes you eligible for reimbursement of the full original amount (as per invoice) paid for the car.
However, this cover is usually available only up to two years from the date of registration of the car. This cover only makes sense when your vehicle is brand new.
3. Engine protector cover
Meaning, the most valuable part of the car, your engine is not covered for non-accidental failures or malfunctions. Now, imagine a situation where the engine of the car is submerged in a waterlogged area. Starting the car in such a scenario can result in the engine seizing. This will not be covered under regular insurance. Here, adding an engine protector cover will insure the car for all non-accidental exclusions related to your engine.
4. Extended Accident Cover
A basic personal accident cover for the owner-driver is compulsory while purchasing insurance for the car. However, the passengers or a hired driver are not covered under personal accident insurance. There is an optional add-on personal accident cover for the passengers of your car as well as separately for your paid driver.
Other out-of-pocket expenses
In car insurance policies, there could be a deductible in-built into the plan. A deductible is that portion of any claim, which is not covered by the insurance company, which the insured has to compulsorily pay out of his pocket at the time of claim settlement. Only the balance amount is payable by insurance company. However, you can get additional discount on your premium by adding a voluntary deductible amount to the compulsory deductible. If your car is old you could consider going for a voluntary deductible to get a good deal on the premium.