Insurance & your Car
'You need insurance', as the popular advertisement goes. While you have a choice
to decide if you do or do not as far as life and property goes, for your car you
need it by law. And a large chunk of the difference between a car's ex-showroom
and on-road price goes towards the insurance premium for your car. So what are you
paying for and how does insurance come to your rescue? It's all explained in these
1. WHICH POLICY -
PACKAGE OR LIABILITY?
There are two types of insurance Package (Comprehensive) and Liability (Third Party).
Though dealers usually make out a Package policy, you can opt for a Liability policy,
which is compulsory by law. The Liability policy covers:
- Third party bodily injury or property. While the liability on bodily harm or death
is unlimited as awarded by the judge, the liability towards property is limited
to Rs 7.5 lakh for four-wheelers.
- Personal accident cover upto Rs 2 lakh on death risk for the owner or the
- Besides this, a third party policy also provides a cover for employees of
the owner of the vehicle injured or killed while travelling in or using the vehicle.
- The extent of this cover is as required under the Workmen's Compensation Act.
A Package policy covers all the above and also the damage caused by accident and
other unfortunate incidents (see panel) in the unfortunate event that your car is
a total loss in an accident, the insurance company is liable to pay you the car's
insured Declared Value (IDV) at thetime of the loss.
A Package policy that will cover only fire and theft or only fire or only theft
can be obtained too. But all Package policies include the third party liability
Obviously the costs vary, with a complete Package policy demanding the maximum annual
premium while a Liability policy demanding the maximum premium while a Liability
policy is way cheaper. But it still makes sense to go in for a Package Policy if
you're going to use your car daily.
Liability insurance is usually opted for by dealers who've bought a car and have
had to renew the insurance. Since they aren't going to use the car or keep it for
long, they take the cheaper way out.
While insurance is your safeguard against accidents, there are certain things that
insurance will not cover, such as consequential loss, depreciation. Wear and tear,
mechanical, electrical breakdown and failure or breakage, war and nuclear perils
and drunken driving. Also, any accident caused by a driver holding an invalid license.
2. WHAT DOES A PACKAGE POLICY COVER?
- Fire, explosion, self0ignition, lightning
- Burglary, house breaking theft
- Riots and strikes
- Flood, typhoon, hurricane, storm, cyclones
- Malicious acts
- Inland transit by rail/road, air, waterways.
The cost of repairing a car can run into large and hurtful figures. It is when you
hold the estimate of damage in your hand that you will feel positively disposed
towards your insurance agent. From the time that the accident happens to when you
finally hold the compensatory cheque, there are procedures to be followed and forms
to be filled. Giving below are five steps that explain how you should go about claiming
3.WHEN THE ACCIDENT HAPPENS
Note down the date, time and place of the incident. Also make a note of the speed
that the car was travelling at that time. All this comes in handy because there
are sections asking about this information in the claim form.
4.STARTING THE PAPERWORK.
Once you've decided you want to claim insurance, you need to submit a letter (stating
your policy number and vehicle number) requesting a claim form to the divisional
office through which you policy has been registered. It also helps if you go to
the divisional office and ask for a claim form - chances are you'll get one without
any questions asked.
Fill out the claim form carefully giving precise information about the circumstances
of the accident and the damage to your car. Along with the form, you also have to
attach a full set of car paper copies (which will be verified by the surveyor),
the police complaint copy (if any), the damage estimate (explained below) and a
copy of the license of the person driving.
The authorised dealer or the garage where your car is going to be repaired will
make out an estimate of damage, which will include cost of parts as well as labour
and painting. A copy of this estimate is to be attached along with the clain form
and submitted to the insurance office. Be warned that repairs on the car cannot
be started yet.
5. THE SURVEYOR
Once your insurance company receives the duly filled claim form, they will issue
a Claim number, which correspondence regarding the claim. The company will also
depute a surveyor to survey the damage that has been claimed. Once the surveyor
has done that and made change (if any) to the estimate, the repairs can start.
BILL AND PAYMENT
Once the repairs are through, you will have to pay the garage out
of your own pocket. The garage will give you bills (separate bills for labour and
parts) and a stamped receipt for the total amount. You have to submit these to the
insurance company starting your Claim number.
The bills are then sent to the surveyor for a bill check, where he checks the bills
against the estimate that he had passed, anything extra has to be paid by you. Plus,
if there are salvageable parts, 3 to 5 percent will be cut for those. Rubber, fibre or other fast-wearing parts carry a depreciation of 50 percent from day one. What
thus means is that if someone rams into your brand-new car and cracks your bumper,
what you get for it under insurance is only half the price for a new one.
7. SEEING THE MONEY
Ideally you should get the cheque within 10 to 14 days of your submitting the biils; but in reality it takes anywhere from 20 days to a month.
8. COMPULSORY DEPRECIATION ON METAL PARTS FOR ANY ACCIDENT CLAIM
Parts of Vehicle
% of Depreciation
0 - 6 months
6 - 12 months
12 - 24 months
48 - 60 months
60 - 120 months
120 months or older
9.ACCIDENT INVOLVING A THIRD PARTY
If a third party injured or killed in an accident involving your
car, notify the police immediately. Try to remove the injured to hospital immediately
but if your personal safety is at risk from a mob, get the police right away. Notify
the insurance company about the facts of the case.
In the event of any notice from the third party motor vehicle claims tribunal or
a court of low, send the same to the company for further action. Also send all notices,
summons etc you receive to the company for attention. The insurance company is liable
to pay to damage to the third party.
10.IN CASE YOUR CAR IS STOLEN
Lodge a police complaint immediately. If the registration book and the insurance policy are stolen along with the car, apply for duplicates as soon as possible.
Keep a liaison with the police in regard to the progress of the investigation.
If the vehicle is not traced after a reasonable period, get a report from the police
to that effect. If the vehicle is traced, inform the insurers as well as the police
11. WHY DRIVING CAREFULLY HELPS
Starting July '03, motor insurance companies are likely to present
car owners with a bad accident record with upto 100 percent claim penalty - this
means they can load the adverse claim ratio into the premium renewal if there are
large claims in the previous year..
12. READING THE FINE PRINT
All plastic, fibre and rubber parts attract a 50 percent depreciation as soon as the vehicle starts plying on the road. These parts include the bumper, bumper absorbers, tyres, tubes, bulbs, headlights, tail-lights, parking lights, all mouldings, beadings, channels, trims, radiator, hose pipes, plastic door handles, coolant and sprinkler bottles.
Salvage is usually applicable only on metal parts (usually 3-7 percent of the value of the parts). Towing charges are payable if the car is in no conditions to move after the accident (maximum payable is Rs 1500 for private vehicles). There is no depreciation on windscreen and window glass.
The insurance company is not liable to pay for coolant and oil, even if have they leaked out during an accident. Not is the company liable to pay for bearings or air-con gas charging.
Non-company-fitted accessories like stereo, speakers, amplifiers, woofers, crash-guard, luggage carrier, side protectors etc have .
12. INSURED DECLARED
VALUE OF A CAR
The Insured Declared Value (IDV) for a new car is taken at 95 percent of the ex-showroom
price. The value depreciates by 5 percent within six months, going up to 50 percent
for cars aged four years and more.
The premium on cars is calculated on the following lines:
- Upto 1000cc with age of car not exceeding 5 years.
3.127% (Zone A), 3.039% (Zone B)
- Between 1000cc - 1500cc
3.283% (Zone A), 3.141% (Zone B)
- Above 1500cc
3.440% (Zone A), 3.343% (Zone B).
The percentage increases as the car gets older. Zone A includes metros like
Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Pune, Chennai and Kolkata while
Zone B accounts for the rest of the country.
14.HOW TO GET THE MOST OUT OF YOUR CAR INSURANCE
Drive carefully No accident, no claim!
This is simply the best way to avoid washing any money and time. License please
Never let a non-license or non-valid license holder drive your car. The insurance
company is not liable to pay damages caused by such a driver to your car or to a
The fine print Check if extra fittings or accessories affect the insurance in any
way. No cliam bonus This is a super saver. If you don't make any claims during the
year, a certain percentage is deducated from your next year's premium.
The percentage increases every year as long as you make no claims and soon you might
have enough to warrant a 50 percent deduction in your premium. But be warned that
one claim and it is all forfeited - so work out how much the repairs will cost you
and whether it would make more economic sense to pay for them on your own and save
a substantial amount on your premium.
Time it right In case you want to claim for an accident that has no police complaint
and your policy complaint that has no police complaint and your policy is up for
renewal, it makes better sense to claim after you've renewed and claim the No Claim
Bonus. Choice galore Even the private sector insures cars now. So you can spend
some time shopping around for the best deal.
Understand what is on offer, compare premiums and go with the insurer that suits
you best. Premium reducers Certain fittings to a car can actually reduce premium.
For example fitting of a security system approved by the Automotive Research Association
of India (ARAI) can get you a discount of 2.5 percent (not exceeding Rs 500) on
your premium. Being a member of a recognised automobile association like the WIAA
can get you a discount of 5 percent (not exceeding Rs 200).
Crossing borders If you intend driving across to Nepal, Bhutan the Maldirves, Sri
Lanka, Pakistan, or Bangladesh, you need to inform your insurance company and buy
additional covers as your policy liability is limited within India. Keep them informed
If you've got your car converted to LPG or CNG, inform the insurance company if
you don't, it will create problems during claim time.
Renew on time Don't let the renewal date lapse. It is a headache to go about getting
the car valued and assessed to make a few policy, it is also punishable by law to
drive without a valid insurance.