The damage to your assets from natural disasters may not always involve your life or even your property. Did you know that in the 2006 Surat floods, around 50,000 cars and 75,000 two-wheelers were damaged?

We all know that insurance on vehicles is a must under the Motor Vehicles Act. This, however, refers the ‘liability only' insurance that covers legal liabilities arising out of an accident (damage to a third person and his vehicle).

The ‘own damage' cover that insures the policy-holder's vehicle is optional and many people don't renew the own damage cover on an old vehicle. This can be a risk!

Vehicles with own damage cover get insured for damages caused by fire, explosion, earthquakes, floods and storms as also burglary and terrorism. The policy, however, doesn't cover normal wear and tear of the vehicle, mechanical breakdown and damage attributable to war and nuclear explosives.

Declared value

The claim paid on a motor insurance policy depends on the extent of damage suffered by the vehicle. If it is something that can be set right by a minor repair, the insurance company will bear the repair charges and, if it is a total loss, the IDV on the policy will be paid, says Mr K.G. Krishnamoorthy Rao, MD & CEO, Future Generali India. IDV refers to the Insured's Declared Value, which is determined by deducting depreciation (for number of years the vehicle is put to use), from the market price of the vehicle. For instance, a vehicle that is used for two years will have a 20 per cent depreciation charged on the market price for arriving at IDV.

While the liability premium forms a small part of the total premium on a comprehensive package policy, the own damage premium is a significant chunk of the cost. The own damage premium depends on the IDV of the vehicle.

Motor insurers offer personal accident cover as riders with the main policy. The sum insured on the rider here is small and may not be sufficient.

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