Personal Finance

How to select the right insurance cover for your vehicle

Vivek Chaturvedi | Updated on April 24, 2021

Select a policy that insures your vehicle in all situations

According to the Motor Vehicles Act 1988, it is mandatory for all vehicles in India to have a motor insurance policy or at least a third-party liability policy to drive and ride legally. While it has been made compulsory by the government, we must be aware of how the policy will cover financial losses and damages caused to a vehicle from unforeseen risks such as natural calamities, thefts and accidents.

One can choose either mandatory third-party insurance or a comprehensive cover for the vehicle. Third-party insurance covers only damage and loss caused to another person, vehicle, or property.

A comprehensive cover, however, includes both third-party liabilities and damage to one’s vehicle as well and offers additional protection through add-ons.

There are multiple options available to protect one’s car and bike with customised policies. Here are a few tips on picking the right motor policy.

Insured declared value

One must check the insured declared value (IDV) stated in the policy as it will affect the claim amount. IDV is the market value of one’s vehicle and is calculated based on depreciation. The depreciation is determined based on the rates set by the regulator and it increases with each year after the purchase.

Also, while comparing policies online, one might come across a lower premium. However it is critical to check if the IDV mentioned is lower as it may not cover the damage caused.

Review add-ons

Reviewing the add-on plans available to ensure you get the maximum benefit is also very important. An add-on plan will cover damages other than the basic insurance cover like own damage and third-party liability.

Roadside assistance add-on comes in handy if one gets stranded within a specific distance from the city due to vehicle breakdown. It also offers benefits such as getting wheels fixed in case of tyre puncture or towing one’s vehicle if engine is damaged.

Generally, a standard policy will not cover damages due to natural disasters or the after-effects of it.

An engine protection add-on helps protect against damages caused due to the leakage of lubricating oil or water entering the vehicle due to natural calamities.

Nil or zero depreciation plan covers repair and replacement cost of rubber, plastic, and fibre components of the vehicle. It helps in covering costs incurred due to depreciation on parts.

Return to invoice cover in car insurance is one of the most valuable covers as it allows the insured to receive full compensation, that is, the last complete invoice value of their vehicle in case of theft or damages beyond repair. Additionally, it is not restricted to its IDV, and the depreciation is not calculated. However, it is applicable to vehicles that are less than five years old.

Additionally, one can also protect passengers with a passenger cover, consumables like nut, bolt or oil/grease with consumable cover, and tyres which are generally not covered in the base policy with a tyre protection cover.

The benefits of the cover will differ based on the plan selected.

It is best to purchase a comprehensive plan as it provides complete protection.

The author is CMO, Digit Insurance

Published on April 24, 2021

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