It is vital to read the fine print when signing up for car insurance, as it can have a significant impact on your financial stability should you be involved in an accident or suffer other losses. Understanding what is covered and what isn’t can help you make informed decisions about which policy works best for you.
To begin with, insurance fundamentally means that you get protection or coverage in case of any stipulated condition mentioned in the insurance plan. There are various kinds of insurance available, including car or motor insurance. While it is crucial that you give your 100% attention to the road while driving, unfortunate events are not foreseeable. This is where insurance protects you from undergoing damages. Whether it is your mistake or a third party’s carelessness, insurance is designed to cover your losses.
What is Car Insurance?
Car insurance is a concept that is not new to the world. It has existed for a long and has gotten wider and better in recent years. Car or motor insurance protects you from unwanted losses in case of any unfortunate event relating to your vehicle. There are different types of insurance available that cover varied mishaps and come with different levels of protective cover for you. Depending on the type of coverage opted for, the different plans offer protection in cases of liability, accident, and/ or theft. While these are fundamental protective plans, you are now free to choose add-ons for an enhanced level of insurance. These can include zero depreciation and no claim bonus protection.
There are third-party insurances available as well. This protection is granted to third parties who face injury or damages caused to others by the insured vehicle in an accident. According to the Motor Vehicles Act of 1988, it is mandatory for every car owner to opt for third-party insurance. But this does not mean that your scope gets limited. You are completely free to go for comprehensive insurance for wider coverage.
What is a car insurance policy document?
Firstly, when you opt for any plan or scheme for insurance, you are obliged to enter into an agreement. This agreement has details of your liabilities and rights. Similarly, a car insurance policy document is an agreement featuring details related to the coverage offered. These details also include the premium breakdown and calculations. The document is conclusive proof of the legal obligation/ contract between the insurer and the policyholder. Now, when you opt for a policy, it is crucial that you carefully read all the details mentioned in the document to ensure that you are getting your requirements fulfilled and not getting into something you are unaware of.
Why is it important to carefully read your car insurance?
Reading the fine print is a must. Check out the bullets below to understand why:
- Calculating premium
In the simplest way, the premium is the liability on you under any policy or scheme. When you opt for an insurance policy, you are under an obligation to pay a certain stipulated amount on an annual basis to avail and enjoy the benefits granted. There have been many cases where car owners end up paying larger premium amounts compared to the protection granted to them. The best way to avoid this is to carefully read your liabilities and compare them to the insurance you are promised in return.
- Varied plans
Today, every insurer is offering you a plethora of plans and insurance schemes. There is no doubt that these plans are carefully designed by experts to make them work for both parties. However, it gets tricky when you opt for insurance that is not required for your vehicle or the city you ride in. For instance, insurance plan coverage that may work for mountain and rough roads may not always be needed in metropolitan cities with smoother roads. You can understand this only by carefully reading and evaluating the car insurance policy document.
- Endorsement documents
In India, the Motor Vehicle Act of 1988 is central and applies to all states. However, every state is free of delegate laws on the matter. This is why insurer companies come up with endorsement documents on top of your car insurance policy documents. The endorsement document contains add-ons or special rules and provisions to ensure that the policy is complying with your state’s Motor Rules. This document is crucial as you will not be allowed to claim insurance if it infringes your state’s law.
What points should you focus on?
When buying car insurance, it is highly recommended that you keep the following things in mind:
- Terms and Conditions
Every car insurance policy document comes with its own set of terms and conditions. However, these conditions might seem daunting, but it is crucial to keep an eye on these lengthy documents. The simplest way to understand this is with an example- Every insurance policy demands you to pay deductibles. This is the amount you are supposed to pay out of your pocket. Terms like these are mentioned in the document and must not be missed.
- Coverage Offered
In India, there are three kinds of coverages being offered under car insurance-
- Comprehensive Coverage– Comprehensive insurance provides you protection for your car and third-party car as well. It is designed to offer you wide coverage, including theft, accident, or damages due to natural calamities. In addition, if there has been any injury or damage to the third party involving your insured vehicle, then the insurance covers the third party as well.
- Standalone own damage coverage– As the name suggests, this covers damages done to your vehicle only. This is a standalone cover that can be purchased when you already have a third-party liability for your vehicle.
- Third-party Coverage– Under liability coverage, the third party who faces any injury or damage due to an insured car gets protection from the insurer. Your own damage does not get any coverage. In India, this type of insurance has been made mandatory.
While policies provide you with a well-planned coverage plan, it is always recommended to opt for add-ons. You can either ask the insurer for their add-on options or check the document to find these. You can opt for emergency assistance cover that promises round-the-clock assistance to deal with any mechanical breakdown issues of your vehicle. In addition, experts suggest that before choosing a plan, policy seekers must look out for the cost of consumables (lubricants, engine oil, etc.) and whether it is being covered or not.
- Claim process
Every insurance provides you protection, but what makes the difference is the process of the claim. This includes the time you have to wait before getting the insurance money, the process of filing for the insurance in case of any emergency, cashless garages, etc.
- Car’s IDV
IDV means the insured declared value of your car. This is calculated by the market value of your car while opting for the insurance. The insurer pays you IDV in case of theft or likewise. Reading this is crucial for two reasons- Firstly, you must be aware of your car’s IDV as it is the highest amount your insurer would pay you in case of theft or total loss of your car. Secondly, the higher the IDV, the higher premium you will have to pay, which can be a burden if not evaluated carefully.
Insurance companies do not offer you 100% coverage in every situation. Especially in India, you are not insured in cases of contributory negligence or driving under intoxication. You must be aware of these exclusions mentioned in your car insurance policy document.
All in all, it is safe to say that there are several policies and plans available; you just have to be prudent while choosing a solid plan that works well for your requirements. You are also allowed to renew your plans without paying an extra amount, but the only way to avail of these benefits is to research, read and understand the document.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.