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Frequently Asked Questions (FAQs) on Car Insurance

Despite car insurance being mandatory and people are used to buying this cover for their cars, there are always questions or doubts that needs to be clarified. Find below a list of questions that will answer all your queries about Car insurance

Car Insurance

1. What is car insurance?
Car insurance is a protection cover for you against financial loss in case of an accident. It is basically a term of contract between you and the insurance company. As per the terms and conditions, a fixed premium is paid by you monthly/annually. The insurance company in return agrees to pay your losses as defined in your policy.

2. Is it important to have car insurance? Why?
Yes, it is important to have a car insurance because the expenses incurred by you due to an accident or damage can be a lot more than you can afford. Car insurance provides you that financial support during such unforeseen circumstances.

3. Does place of residence affect the premium amount?
The amount of the premium you pay is determined by the zone you live in. The Indian Motor Tariff Act has specific zones that have a different rating and this affects the amount of premium. The city of registration of the vehicle is what determines the premium in these zones, eventhough the place of use and insurance renewal may be different. For quick reference, here is a general categorization:

Zone A: Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, and Pune. Zone B: Rest of India

4. Does the make/model of a car affect premium amount?
Although not directly, factors that determine insurance rates, the age, make, and model of a vehicle can predict how likely it is that the insurer will have to pay for an insurance claim thereby affecting the premium. Some aspects that are considered are how likely each type of vehicle is to be in an accident, how likely a certain type of car is to be stolen, what the average repairs cost for common types of damage, and how likely the vehicle you drive will result in a costly insurance claim.

5. What is a no claim bonus (NCB)?
A No Claims Bonus (NCB) is a discount offered to parties who do not claim on their auto insurance policies over a given period. This monetary reward is extended to people who drive carefully and do not seek regular payouts from their insurance company on a regular basis. An NCB comes into play when you go to renew your existing car insurance policy. You will earn such a bonus if you have not filed a claim in a given period. The rates vary depending on the duration of the claim-free period. If you have not filed a claim over a period of 12 months, you can earn a discount of 20% on the premium of the renewed policy. The percentage of this bonus goes up to 25%, 35%, 45% and 50% provided you do not claim on your policy for periods of 2, 3, 4 and 5 consecutive years, respectively.

6. What is IDV (insured declared value)?
As per India Motor Tariff 2002, Insured Declared Value (IDV) of the vehicle will be the sum insured for the purpose of this tariff and will be fixed at the commencement of each policy period for each insured vehicle.

7. How IDV is calculated?
IDV is calculated as manufacturer's listed selling price minus depreciation. The registration and insurance cost are excluded from IDV. The IDV of vehicles aged over 5 years is calculated by mutual agreement between insurer and the insured. Instead of depreciation, IDV of old cars is arrived at by assessment of vehicle's condition done by surveyors, car dealers etc.

IDV= {[(Manufacturer's listed selling price or Ex-showroom price) + (Sales Tax) + (Accessories that are not included in listed selling price - depreciation)] - (Depreciation + Registration costs + Insurance costs)}

8. What is compulsory excess?
Compulsory excess is the amount that you will have to pay out when you make a claim. If the claim made by you was due to someone else's fault, your insurer may pay out your claim in full and waive your excess. However, you will have to check the terms and conditions of your policy to determine if such a point has been mentioned by the insurer.

9. Is it possible to pay premium for car insurance in installments?
While there is a possibility of paying your auto insurance in monthly installments, it is likely that you may end up paying more as insurer may add an extra fee for monthly payments as well as interest charge. Further, you are likely to miss out on some good deals on the car insurance if you choose to go the monthly route. It is advisable to check with your concerned insurer and know the possibility of interest rates and other benefits before taking a final call.

10. When should I renew my car insurance?
Generally, Car insurance is renewed year on year. You are likely to get a call from the insurer weeks before your insurance policy is about to lapse. You can either pay the renewal payment in cheque drawn in favor of the insurer. You can ask your insurer to send a cheque collecting agent, who would collect the cheque and hand you over a receipt detailing your insurance renewal details. Your renewed insurance paper reaches you within the next 10 working days after the payment is made.

11. How do I change the registration address or vehicle information on the insurance policy?
Yes, you can! If there are any changes in the policy like change of address or modifications to the vehicle or its use, it will be done by an Endorsement by your insurance company. Submit a letter to your insurer with proof for the changes and obtain an endorsement. Some endorsements may require you to pay additional premium. Check the correctness of the endorsement.

12. How do I transfer the insurance when I am selling my car?
When an you transfer the ownership of your vehicle to another person, then as per Sec 157 of Motor Vehicles Act 1988, the certificate of insurance and the policy that you have purchased will also be automatically transferred in favour of the new owner with effect from the date of its transfer.When selling your car, all you have to do is ensure that the following documents are in place:

  • Original Registration Certificate (RC)
  • Application Form 29, 30 (with your and purchaser signature)
  • Affidavit from you and the purchaser regarding transfer of ownership
  • Address Proof of purchaser
  • No Objection Certificate from the concerned RTO/ AETC in case of Transport Vehicles
  • Valid Insurance Certificate
  • Appropriate fee

13. What do I have to keep in mind when I transfer my insurance to the purchaser of my vehicle?
When you transfer the insurance on your old car to the buyer, ensure you get a no claims certificate from the insurer. This certificate can be used at a later date, when purchasing insurance on a new car. While people prefer to use the certificate to receive a discount on the new car insurance premium, others ask for a refund of the same amount.

14. What documents do I need to submit at the time of claim?
Some of the documents that are generally required while claiming insurance are a copy of the Registration Certificate (RC), Proof of loss, medical and car repair bills and a police report. A statement of claim and a record of expenses incurred are also other supporting documents that are deemed necessary.

15. What are the risks covered by the comprehensive car insurance policy?
A typical Car Insurance Plan covers the following:
  • Loss or damage to the vehicle insured
  • Loss or damage to your vehicle due to strikes, natural calamities, theft, accident, explosion etc...
  • Personal accident cover
  • Financial liability against injury or death caused to a third party

16. Am I eligible to get NCB on expired policy?
Your NCB on the existing policy is terminated if the policy is not renewed within 90 days from date of expiry.

17. What to do if the insured vehicle meets with an accident outside the city, area or state from where the policy is issued?
If your insured vehicle meets with an accident outside the city, area of state from where the policy has been issued, you can do the following:
  • Call the toll free number of the Insurance Company and intimate about the accident. Do as per what is advised by the insurance company
  • In case you aren't aware of the contact no. of insurer, confirm if it has an office at the place where accident took place. Intimate the claim to the local office
  • In case of no contact with the insurer or if the accident happened in odd hours /holiday, keep the photographs of vehicle on the spot of accident
  • Check for the Road Side Assistance support contact details and call the call centre number for immediate help
  • If the loss is major and there is a third party damage / loss / Injury / death etc., file an FIR / Police report immediately

18. What is break in renewal policy or what is Expired insurance contract ?
When your policy completes a year, you need to make sure that it is renewed before the expiration date. At the time of buying car insurance or renewing your policy, you would notice that the policy clearly states the time and date from which the cover is effective and the date and time on which the cover terminates. If you miss the deadline even by a day, your policy will have a break. Considering your car insurance policy is an annual contract that needs to get renewed every year, a break in the tenure will mean that instead of renewing your policy, you will need to buy a policy afresh. This could mean a higher premium subsequently or rejection to offer insurance.

19. Why should one have a comprehensive insurance policy when law mandates insurance only for 3rd party injury, death or property loss?
A comprehensive coverage for your car provides protection against any kind of damage arising out of theft, war, natural calamities, strikes, third party damage etc. You can further add on to it coverage for each and every accessory of your car such as engines, accessories, seats etc, and zero-depreciation covers as well. This is the most preferred coverage plan as it takes care of your entire car's insurance without any hindrance.

20. Are there any special discounts available for handicapped people?
For handicapped persons, a discount of 50 per cent is available on the Own Damage premium - provided that the vehicle has been modified for use.

21. What's my liability if someone else is driving my vehicle at the time of accident?
When your car is insured, depending on the details of the accident involved, the insurance company typically, takes over the compensation liability irrespective of the person behind the wheel.What you need to keep in mind is however,
  • That your vehicle is in roadworthy condition
  • You have proper documents of your insurance cover
  • The driver employed is experienced enough to handle the model or type of your car besides having a valid driving license

22. What is an endorsement in Car Insurance?
An endorsement is a written form attached to any insurance policy that bestows the right to alter the policy's coverage, terms, or conditions. This is sometimes called a rider. It is like an addendum to your existing policy which records the stated change/s and the policy detail is changed according to the relevant endorsement.

23. Under what circumstances, an endorsement is issued?
You can affect changes in your car insurance plan due to several scenarios which including corrections in engine number, chassis number or registration number OR change in name, address, contact details, car information etc. It is also used for specific alterations that may be required like inclusion or increase in voluntary deductible. All these scenarios may call for a change in your original policy which will require an Endorsement.

24. What are the steps to follow to get an endorsement? What are the different documents that are required for endorsement?
All you need to do to get an endorsement is submit a letter requesting for the changes or corrections in your policy supported with specific proof documents for each. Based on the validity of the changes requested, the Insurance company will then initiate the process.

25. What are the important things I should bear in mind while insuring my vehicle?
  • Fill up the proposal form yourself, answering all the questions correctly and sign it. This plays a vital role in deciding the premium and the admissibility of claim. Incomplete or incorrect information may result in denying the claim to you. Therefore, never leave it to any other person to fill it up
  • Ensure that your and vehicle details are correctly recorded in the policy schedule. Make sure that every digit of vehicle registration number, engine and chassis numbers etc. are fully and correctly entered. Any error should be immediately got corrected as otherwise it would create trouble at the time of claim
  • If there are any changes in the policy, it will be done by an Endorsement by the office. Please check the correctness of the endorsement
  • Read policy terms, conditions, particularly the exclusions etc. very carefully. They are important from claim point of view
  • Remember, registration and insurance of the vehicle should always be in the same name with same address. Otherwise the claim is not payable

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