Insurance companies offer two types of motor insurance cover. One is the liability-only policy, which covers third-party liability for bodily injury or death and property damage. The other is a package policy, or comprehensive cover, which covers loss or damage to the insured vehicle and the third-party liability.
Apart from these, insurers also offer a few add-on covers that provide policyholders many benefits. Such add-on covers are available for all private cars, two-wheelers and even commercial vehicles. So, before finalising on the add-on covers, one must take note of the total sum insured of the vehicle and the costs of the add-on covers.
Insured’s Declared Value
The total sum insured of a vehicle is known as the Insured’s Declared Value (IDV). In case of theft of the insured vehicle or in case of total damaged, the owner of the vehicle can claim the amount depending on the IDV. Insurers fix the IDV of the vehicle every year at the time of the renewal of the policy based on the year of manufacturing, selling price of the brand and the model and depreciation of the vehicle.
For arriving at the IDV, insurers calculate depreciation of the vehicle on a fixed formula: Vehicles up to one year is 15%, up to two years 20% of the original IDV, 30% for three years, 40% for four years and 50% for five years. For vehicles that are over five years old and of obsolete models, the IDV is determined on the basis of an understanding between the insurer and the insured.
A policyholder can opt for add-on covers to the basic vehicle insurance and the pricing is based on the IDV. However, policyholders must keep in mind that add-on covers are not applicable if the vehicle is used for motor rallying and if the vehicle is not being used or driven according to the applicable laws and regulations of the Motor Vehicles Act.
In zero or nil depreciation cover, the policyholder will get the full claim on the value of parts like plastic items, fibre, rubber, windscreen that are replaced in the event of loss due to accident. Most insurers offer zero depreciation for the first three years and some even offer for five years for higher premium.
This is a popular add-on cover at a very nominal cost, which takes care of the car in case of a breakdown or accident on the road. The policyholder will have to call up the designated helpline number of the insurer and help will reach him. It covers the replacing of flat tyres, alternate battery, alternate key, towing vehicle, and even emergency fuel and alternative vehicle.
It provides protection to the engine in case of flooding as hydro-static lock is a major causes of engine failure. Since damage due to hydro-static lock, which happens if one repeatedly tries to run a moist engine, is not covered under a regular motor insurance policy, an add-on engine cover can be of great help.
- A person whose vehicle is registered with the RTA can take add-on cover
- Add-on covers are available for private cars, two-wheelers and commercial vehicles
- The premium for add-on cover is fixed based on the IDV of the vehicle
- Zero-depreciation and engine cover are the most popular add-on covers
- Add-on covers are not applicable if the vehicle is used for motor rallying