98159 SIP myths you must know!

We always try to take multiple precautions to safeguard ourselves and our assets. But even after proper precautions, something or other goes wrong. We can’t do anything about that but we can insure ourselves and our assets. For Instance, a car Insurance policy is a kind of policy that protects and helps you in covering your financial and legal liabilities caused due to unavoidable circumstances like accidents.

In order to select the most suitable car insurance, it’s important to know the types of car insurance offered by insurance companies. Majorly they are of two types as mentioned.

Third-party car insurance:

If you have an accident, a third-party car insurance policy takes care of the expenses that are incurred to the car you dashed into. The other party will receive reimbursement for the damage, and you will be saved from a financial burden. For example, if your car collides with another car, the insurance company will pay only for the damage to the other person’s car.

Comprehensive car Insurance:

This option is more preferable as it provides enhanced coverage including the coverage of third-party insurance. It also provides protection for your own vehicle. This means you are insured if your car causes damages to others or by others. Below are the plans it covers:

– Loss or damage due to natural calamities

– Loss or damage due to man-made calamities

– Personal accident cover

– Third-party legal liability

But before opting for any car insurance you should understand major motor insurance jargons. Mentioned below are some of the important car insurance terms that will help you understand your policy documents in a better way:

Insured Declared Value (IDV) – The IDV of a vehicle is the maximum sum that the insurer pays in case of theft or total loss of that vehicle. IDV is usually the current market value of a vehicle and comes into the picture during insurance claims.

Zero Depreciation Cover – When a claim is registered after an accident happens, insurance companies use a formula that factors in depreciation to determine the payable amount. As cars depreciate, it could leave you paying a minimal amount of the overall expense even in case you have comprehensive coverage. But, if you opt for a nil depreciation cover. No depreciation will be applied.

Bumper to Bumper insurance – It is a comprehensive insurance policy that provides 100% coverage of damages to the fibre, metal, and rubber parts of your car. This policy is ideal for those who have new & luxury cars and who drive in accident-prone areas.

No Claim Bonus (NCB)- NCB is a discount that a policyholder gets from the insurer for making zero claims during the policy term. NCB is applied on policy renewal, which reduces the insurance premium amount significantly. It varies between 20% for the second year and up to 50% for the sixth year. Therefore, it is advisable to refrain from making claims for minor damages, instead, reap the benefits of the NCB.

Voluntary Deductible – Voluntary deductible is the limit chosen by a policyholder to meet a part of the claim from his own pocket. This amount depends on the policyholder who factors in his affordability and risk; however, voluntary deductible is not mandatory. Remember, the higher the voluntary deductible, the lower the premium.

The car insurance policy is generally for one year and it’s important to renew it. But, it’s not compulsory to renew it with the same company every time; if you find a policy better from another company, you can switch at the time of renewal.