5 Important Things To Know Before You Buy Your First Vehicle Insurance Policy

As a first time buyer it is very challenging to understand the technical aspects and various terminologies while buying a vehicle insurance policy. We list out some key terms which you should know thoroughly before you head out to buy your first vehicle insurance policy.

1. Premium

It is the amount that you will pay to get your vehicle (car/bike) insured for a particular sum and a particular period - typically a year. In other terms it is the cost of buying the insurance policy. The premium is a non-refundable amount, which means that you will not get back that amount even if you do not make any claim in that particular year. 

The premium of the vehicle varies from model to model and type of vehicle. For example, the premium for a car which is worth Rs. 10 lakhs would be higher than the premium for a motorcycle which is worth Rs. 2 lakhs. The premium is calculated based on various factors such as the year of manufacture, present value of the vehicle, type of vehicle, etc.

2. IDV - Insured Declared Value

The IDV represents the market value of your vehicle i.e. how much is your car/bike worth at that particular time when you purchase an insurance policy. In simple terms, it is the maximum amount you can claim from the insurance company in case your vehicle is stolen or your vehicle is completely damaged beyond repair.

IDV, in simple terms, is equal to the listed price of your vehicle minus depreciation. The older your vehicle the higher is the depreciation and thus a lower IDV of your vehicle. A table below shows typical depreciation values according to the age of you vehicle.

Let’s suppose you bought a motorycle worth Rs. 1 lakh (excluding registration charges and other expenses such a accessories, annual contract, etc.), after 1 year the IDV of your motorcycle will be Rs. 1 lakh minus 20% depreciation which is equal to Rs. 80,000. This is the maximum amount you can claim towards your insured motorcycle.

If your vehicle becomes more than five years old, the IDV is mutually decided by you and an agent from the insurance firm after inspecting your vehicle's condition. The calculation of IDV shown above is in a simple form for you to understand the concept. In actual, the calculation of IDV could be a little more complex.

3. Policy Coverage

The policy coverage is the most importation section of the vehicle insurance which many owners fail to go through it thoroughly before buying. Insurance agents, in interest of time and convenience often skip this section while selling a policy to the vehicle owner. However the buyer should read the policy wordings & conditions before buying the cover.

The coverage section includes a list of situation under which you vehicle is insured and the components of your vehicle that are fully or partially insured. It also explicitly mentions the situations in which your vehicle will not be covered at all. Thus it is very important to go through this section thoroughly yourself rather than relying on the words of the insurance selling agent.

Typically, most policies do not cover you vehicle under following conditions:

• Damage to vehicle due to natural wear-and-tear
• Mechanical or electrical breakdown of your vehicle
• Damage to vehicle if the driver/rider was under the influence of alcohol
• If the vehicle was driven by person who does not have a valid license
• Damage to tyres and tubes of the vehicle, unless the vehicle is damaged at the same time.

4. Number of Claims

Before buying a policy please check the number of times you can make a claim in the given year. In some cases you can make a maximum of two claims in a given year . If your vehicle gets damaged multiple number of times during a year, then you would ideally like your policy to have a provision of multiple number of claims unless you plan to pay the cost of repair from your own pocket.

5. Third Party Insurance

Imagine a situation where you are involved in an accident which results in damage to the other person’s vehicle or injury to that person due to your mistake. This would result in you paying for the damages to repair other person's vehicle and/or the medical cost for the injury suffered by that person.

But wait, if you have a third party insurance bundled with the vehicle insurance you have purchased, you are saved from paying for the above damages caused by you from you own pockets. The third party insurance pays for the damages/loss suffered by the person involved in an accident with you. Again, the maximum amount insured for third party damage/loss varies from policy to policy and also involved several terms and conditions along with a tedious process to claim it.

Looking to quickly buy a vehicle policy?

We suggest you try out the Reliance General Insurance online vehicle policy purchase option. Rather than contacting an insurance agent and wasting precious time and days to get your policy, going online and buying the policy yourself makes a lot more sense these days.

There are several insurance companies that now offer the option for customers to purchase insurance online through their website. Many a times process of purchasing an insurance online is time consuming since you have to manually fill in every detail of yourself and your vehicle. Most of the times you do not have certain information of your vehicle such as chassis number or engine number [74]  readily available while filling those long online forms. Thus causing you to spend hours in finding out the required information about your own vehicle.

We came across this interesting and innovative approach by Reliance to make online purchase of insurance hassle-free for customers. All you need to do is just enter your vehicle registration number (e.g. MH-01-AB-XXXX) and the website will automatically fetch all the relevant vehicle information that otherwise you would have to enter manually spending an hour or so looking into several documents related to your vehicle.

Some key benefits of Reliance insurance:

Parting Notes

We hope this article helped you understand few key terms involved while buying a vehicle insurance policy for the first time. We also acknowledge that the article does not contain exhaustive list of terminologies/concepts that you need to know while buying a vehicle insurance policy. If you liked/disliked this article do post your comments below or write to us at team-zest@motorzest.com

Reliance General Insurance link :  https://www.reliancegeneral.co.in/Insurance/Home.aspx

Pic Source: InsuranceHotline.com