Personal Finance

Get more from your regular vehicle insurance

Rajalakshmi Sivam | Updated on June 04, 2011 Published on June 04, 2011

Why opt only for the same old motor insurance policy when you can have add-ons to up the pay-offs?

When did you buy your car? Last year? Then it is likely that you will have only a basic insurance cover on it. Under a basic policy, the sum insured under the policy keeps reducing as the vehicle ages. If you make a claim, you have to be content with a payment that reduces from the original cost of the car, the depreciation in its value.

But, do you know that you can take an add-on cover and get your full costs reimbursed now? While the ‘zero depreciation' rider pays claims without deducting depreciation, the ‘invoice price cover' will pay the entire price you coughed-up to purchase the vehicle in a ‘total loss' situation. By paying little extra by way of premium, you can pass on a good portion of the risk your bear to the insurer. Do check out the following options before renewing your motor insurance this year.

A basic policy

Any motor insurance policy usually covers third party liability and ‘own damage' too (damage of the policyholder's vehicle). Third party premium is fixed by the IRDA and insurers follow the set tariff rate.

The ‘own damage' premium is decided based on IDV (Insured Declared Value) - IDV is the vehicle's cost price less the depreciation for the number of years it has been used. The ‘own damage' premium can reduce if you accumulate your no-claim bonus (NCB). NCB is the benefit given to the owner of the vehicle for no-claim years and can be adjusted against the premium due.

On a claim following damage of the insured vehicle, the insurer will pay a maximum of the vehicle's IDV.

However, general insurers now offer many add-ons to the basic policy. However, these cannot be purchased on a standalone basis. Also, each of these add-on covers require you to shell out a higher premium so it makes sense to pick and choose among those .

Zero depreciation

This product pays full claim to the policyholder without any deduction for depreciation. Bharti AXA, ICICI Prudential and HDFC ERGO are some insurers that offer this add-on cover. Suppose the cost of a specific plastic part in your vehicle comes to Rs 5,000. On a claim following damage of this item, the insurer will pay the policyholder only Rs 2,500 after deducting 50 per cent as the charge for depreciation. To replace the damaged item the policyholder will have to shell-out Rs 2,500 from his own pocket! With a ‘zero depreciation' cover, you can avoid this situation. However, this cover comes with certain preconditions.

Mr K.N. Murali, Senior Vice President & Head Motor Vertical, Bharti AXA General Insurance says, “We give depreciation cover for vehicles that are not more than two years old (from date of registration)”. The cost of this cover varies from 0.24-0.60 per cent of the IDV in case of Bharti AXA's policies. The make of the car and its cubic capacity decide the charge of the ‘depreciation cap' cover.

Invoice price cover

In case of a ‘total loss' on the insured vehicle following an accident or a theft, a basic policy will pay you only the IDV. But, if you top it up with an ‘invoice price' cover, you can reimburse the total purchase price of the vehicle.

Yes, this cover makes good the difference between claim amount receivable and the actual invoice price of the vehicle. Some insurers impose an ‘age' condition on the vehicle for this cover. With TATA AIG this cover is available for vehicles up to 3 years old; Bharti AXA has a 2-year age bar. The cost of this cover is based on the cubic capacity of the vehicle. For a Maruti Alto (where cubic capacity is below 1000), the charge for this cover is 0.20 per cent of IDV with Bharti AXA.

NCB protect

The ‘NCB protect' cover helps the policyholder retain his no-claim bonus despite making a claim.

Normally, when the first claim is made on the insurance policy, the policyholder stands to lose his entire accumulated no-claim bonus. Tata AIG which offers this cover has a condition that retention of NCB will be allowed only if the accumulated bonus is more than 25 per cent and there was no claim in the two preceding years.

No dearth of options

In addition to those discussed above, there are more add-on covers too that come tagged on with motor insurance. Sample these.

Bharti AXA offers medical expenses cover, hospital cash cover, ambulance charges cover for the driver of the vehicle, with its motor policy at flat charges per person (depending on the car's seating capacity).

Tata AIG's motor insurance policy offers add-ons that include ‘key replacement' (replace vehicle keys is lost), ‘loss of personal belongings' (for loss of belongings inside a vehicle) and ‘daily allowance' (pays a fixed sum for hiring a vehicle for transport when the insured vehicle is under repair).

ICICI Prudential provides ‘consumable items add-on' cover that gives cover for items such as nut and bolt, screw, washer, AC gas, bearings, distilled water, etc. which normally get reduced from the claim amount at the time of claim settlement.

A motor insurance policy is no longer a standard one-size-fits-all policy. The price and coverage offered differs across insurers. So, make sure you do your homework before signing on the dotted line!

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