While theft and third party cover are parts of a comprehensive insurance plan, there are some other things that are not covered in a plain comprehensive policy.
By Tarun Mathur
More than 1200 road accidents take place in India every day, and in those accidents, at least one death occurs every four minutes. If you take into account minor accidents that are not reported but have become very much part of our daily life, the scenario becomes scary, and should make every vehicle owner sit up and think how to protect the vehicle against these mishaps. Luckily, there are various insurance products available in the market, and one should just compare them and go for the best suited.
Motor insurance is of two types: One, Third Party Insurance which protects you only against any third party liability; and second, Comprehensive Insurance, which not only covers third party liability but also the damage caused to you and your car. While theft, a major accident resulting in total loss of vehicle, and third party cover are parts of a comprehensive insurance plan, but there are some other things that are not covered in a plain comprehensive policy. These include consumables, file charge, depreciation cost, etc. The list of exclusion is pretty exhaustive so for a bumper to bumper insurance protection, you will have to opt for some add-ons that come at a nominal additional cost.
Like in any other equipment, a car’s parts also get old over a period of time and lose some value. So in case of an accident, your insurer will pay only the depreciated value of the damaged parts, and not the market value of the parts needed to be replaced. The Insurance Regulatory and Development Authority (IRDA) has set guidelines to calculate depreciation rates of various parts. (Please see the table). So, if you want to protect against the depreciation, you need to buy the Zero Depreciation add-on, which generally costs 0.4% to 1.5% of your vehicle’s Insured Declared Value (IDV).
Repair Type – Depreciation
Rubber/ Nylon/ Plastic parts, Tyres, Tubes and Batteries
Fiber Glass components
* For all kinds of Paint work – depreciation rate is 50% on the material cost required for paint job. If a collective amount is charged, then the cost of material is accumulated to be 25% of the money charged and then 50% depreciation is applied. However, zero-depreciation add-on doesn’t cover tyres and tubes. Another add-on is required to be purchased to cover the same, which is offered by a very few insurers.
A typical bumper to bumper insurance policy covers the damage that your car’s engine may suffer in an accident. The other reasons for engine damage such as due to road bumps or water ingression in the engine due to water logging are not covered in a standard policy. So, it is advisable to buy engine protection add-on to recover from the insurer the full cost of engine repair. Considering that engine repairs may cost between Rs 10,000 and Rs 50,000, it makes complete sense to buy this add-on at a nominal cost, which is generally 0.15% to 0.20% of the IDV.
Consumables are the things which get consumed within a certain time -frame and need to be replaced from time to time in order to keep the car in a good running condition. The list of consumables is rather long and it includes items such as AC gas oil, brake oil, battery electrolyte, AC refrigerant, power steering oil, windshield washer fluid, radiator coolant, nuts & bolts. Your insurer will not pay for such consumables required to be changed due to an accident, and you may have to foot the bill. However, for an annual premium of only Rs 200 to Rs 800, depending upon the IDV of your car, the consumable add-on can save you a considerable amount of money.
Power Steering Oil
1500-3000 per fill
400-500 per fill
- Prices are for a mid-engine size, non-luxury vehicle
It is clear from the above that by paying a nominal amount for some add-ons, one can actually ensure bumper to bumper insurance protection for your vehicle.
(The author is Co-Founder and Director, Policybazaar.com)