Car (Four Wheeler) Insurance | Nilkanth Advisory

What are the types of Car Insurance?

There are two forms of motor insurance: Liability Only policy that covers bodily injury and/or death, property damage to third party and also provides personal accident cover to the occupants. The second being Comprehensive policy that covers loss or damage to the vehicle insured in addition to the Liability Only policy.

As per the Motor Vehicle Act 1988, Liability Only policy, also known as Act Only policy, is mandatory for all vehicles plying on public roads in India. This cover protects against any liability arising from bodily injuries and/or death, property damages to a third party. It also includes a Personal Accident cover for the owner-driver. Comprehensive Insurance, also known as Package Policy, covers loss or damage to the insured vehicle in addition to the Liability Only policy.

The following risks that can cause damage to the insured car are covered:

Fire, Explosion, Self-ignition or Lightening
Terrorism, Riot and Strike, Malicious Act
Burglary, Theft and Home Breaking
Earthquake, Storm, Tempest, Flood inundation, Landslide or Rockslide

What does car insurance include and exclude?

Motor insurance includes a variety of factors that may result in damages to your car and injury to its occupants. The exclusions comprise of normal wear and tear, damages suffered while driving under the influence of intoxicants, etc. For a more comprehensive list, see below.

What Motor Insurance Includes?

The damages covered by a car insurance policy are enumerated under the OD section of the policy document.

What Motor Insurance Excludes?

Normal Wear and Tear and Electrical or Mechanical Breakdowns
Damage to Tyres (unless vehicle also damaged)
Driver without a Valid Driving License
Driving under the influence (DUI) of intoxicants such as liquor or drugs
When the vehicle is used for any illegal purpose
Usage outside geographical limits
Vehicle is used for Hire or Reward, Carriage of Goods, Organised Racing, Pace Making, Speed Testing, Reliability Trials
Nuclear Wars and Perils

What factors affect the total premium of a car?

The premium is determined on the basis of the car value, age of the vehicle, cubic capacity and geographical zone. The insured has an option to select various add-on covers available with the insurance companies.

Insured Declared Value
Cubic Capacity
Age of Vehicle
Geographical Zone
Add-on Cover, if opted
Third Part Liability (as defined time-to-time by IRDAI)
Owner-Driver Personal Accident (PA) Cover for Rs. 15 lacs
Personal Accident Cover for Passengers maximum to Rs. 5 lacs Per Passenger
Anti-Theft Device Discount
CNG / LPG – Inbuilt or External

How is the sum insured calculated?

Sum Insured is fixed at the commencement of each policy period and known as Insured Declared Value (IDV). It is fixed on the basis of manufacturer’s listed selling price, adjusted for depreciation, defined under the Indian Motor Tariff.

For Own Damages

The sum insured is based on the Insured Declared Value (IDV) of the car. IDV is the value assigned to the vehicle by the insurance companies based on the manufacturer’s present value of the car and the depreciation percentage based on its age. Some companies may also consider the accessories to get the final IDV.

For Third Party

Third Party Liability Insurance is mandatory under the Motor Vehicles Act, 1988. It provides protection against injury or damages to third parties or their belongings in case of an accident. Insurance companies also provide a Personal Accident cover that covers accidental death or permanent total disability for the owner-driver of the insured vehicle.

What is a No Claim Bonus (NCB)?

NCB is a discount given by insurance companies while renewing a motor insurance policy if the owner has not made a claim during the previous policy period(s). The NCB can be accumulated up to maximum of 50% on OD premium.

NCB is transferable from previous policy to new policy of same class of vehicle but cannot be transferred from a private policy to a commercial policy.

The standard rates of NCB are:

No Claim Period

1 year of no claim

2 consecutive years of no claim

3 consecutive years of no claim

4 consecutive years of no claim

5 consecutive years of no claim

Discount Rates on Own Damage Premium

20 %

25 %

35 %

45 %

50 %

Comprehensive Coverage Add-ons

Zero Depreciation Cover

When it comes to Car Insurance, people usually prefer to take the Comprehensive Insurance Plan which covers the vehicle, the owner and any Third-Parties. To protect the value of your car which depreciates over time, you will need to have a Zero Depreciation Cover. This protects you from incurring additional financial expenses because of depreciation. It enables you to claim without deducting any depreciation on certain materials. In case of an accident, the complete cost will be covered by the insurance company without considering the depreciation cost of parts. You get the maximum reimbursement for your claims. To put it simply, Zero Depreciation Cover offers complete Coverage without factoring in depreciation

A zero depreciation car insurance is a comprehensive car insurance policy, with the zero depreciation add-on cover included. This implies that your car will be devoid of its general depreciation during car insurance claims.

Without the zero depreciation cover, all insurers account for depreciation on your car’s parts and therefore pay you your claim only after subtracting the amount of depreciation. With the add-on, no depreciation is subtracted, and you get more money during claims.

Benefits of Zero Depreciation Car Insurance Addon

Save Money

Having a Zero Depreciation Addon ensures that you do not have to shell out money from your pocket in case there is a claim, as without a Zero Dep addon the cost of depreciation of the parts has to be borne by you. But with a Zero Dep Addon, that is taken care by your insurance company.

Get a Higher Claim Amount

Securing your car with a zero depreciation add-on means the depreciation on your car’s parts won’t be calculated and hence you’ll receive a higher amount during claims.

Peace of Mind

Opting for a zero depreciation addon ensures you don’t unnecessarily spend from your pocket during claims and honestly just being assured that someone will have your back during your unfortunate times can be so satisfying and really gives you some peace of mind.

What is not covered in a Zero Depreciation Addon?

Driving without a Driver’s License

You won’t be applicable to receive the benefits of a zero depreciation addon if you don’t have a valid car license.

Cars More Than 5 Years Old

Unfortunately, a zero depreciation addon cannot be opted for if your car is more than five years old.

Driving Under the Influence of Alcohol

Those driving under the influence of drugs or alcohol are excluded from benefiting from a zero-depreciation cover during claims.

Doesn’t Cover Compulsory Deductibles

A zero depreciation cover doesn’t cover for your compulsory deductibles (if any) included in your car insurance plan.

Doesn’t Cover Mechanical Breakdowns

As a standard rule, a zero depreciation cover won’t cover for mechanical breakdowns or normal wear and tear of your car.

Cost of Engine Oil

This addon doesn’t cover for costs such as engine oil, clutch oil, coolant, etc.

Why is a Zero Dep Car Insurance better than a standalone Comprehensive Car Insurance Policy?

A standalone comprehensive policy is no doubt a great way to go about in protecting your car from all possible damages. However, during claims- you will still be required to pay for your car’s part depreciation. That’s why opting for a zero depreciation addon cover within your Comprehensive Car Insurance Policy is a better option as it won’t only give your car maximum coverage but will also save you from paying for your car’s depreciation cost during claims.

Difference between Zero Depreciation and Comprehensive Car Insurance

Zero Depreciation Car Insurance

Comprehensive Car Insurance

What is it?

A zero depreciation cover is an optional addon you can opt for in your car insurance policy. Having this addon in your plan ensures your insurer won’t charge for your car’s depreciation during claims and hence, you won’t be liable to pay for the cost of depreciation of your car’s parts during claims.

A comprehensive car insurance policy is a type of car insurance policy that covers for your car’s own damages and third-party damages. This type of policy can further be customized for extensive coverage.

Premium

On opting for this addon, your comprehensive car insurance premium will increase by approximately 15%.

The premium for a standalone comprehensive car insurance policy is lower than that of a comprehensive car insurance policy with addons.

How much do you save?

While you pay a slightly higher premium, your long term savings are high as you aren’t required to pay for your car’s depreciation costs during claims.

The only saving you have is the extra premium you would save on by not opting for addons.

Age of the Car

A zero depreciation addon can be opted for all cars that are less than five years old.

A comprehensive car insurance policy can be opted for all cars that are less than fifteen years old.

Cost of Depreciation

Having a zero depreciation addon means you don’t need to pay for the cost of depreciation during your car insurance claims.

In a comprehensive car insurance policy, you will be required to pay for the cost of depreciation of your car’s parts during car insurance claims.

Consumable Cover Add-on in Car Insurance

A Comprehensive Car Insurance plan is known to score over the basic Third-party Plan because of three reasons – it includes the law-stated cover, it offers the Own Damage cover, and it allows you the opportunity to purchase Add-ons. Add-ons such as a Consumable Cover can come in handy to derive more out of your car insurance policy.

Add-ons are not compulsory – you have the option to buy or skip them. Therefore, you should only go for them if they are suitable for you and add value to your policy. Are you wondering if a Consumables Add-on will add value? Read ahead to know all the details about this additional coverage.

What is a Consumable Cover in Car Insurance?

Before you understand what is a Consumable Cover in car insurance, here are a few lines explaining what are vehicle consumables.

Consumables are commodities that have a specific and limited use. Once you use such a product, you may not be able to re-use them in the future. For example, once you use nuts and bolts in your car, they cannot be reused. They would have to be replaced now and then. Similarly, the engine oil of your car, once used, gets burnt out.

Your Comprehensive car insurance usually does not compensate or pay you for any of the car’s consumables. At the time of claims, you are supposed to pay out of your pocket for the replacement of these consumables. To avoid this, you can opt for a Consumables Cover as it covers such expenses. Since this is an additional cover, your overall premium amount increases. However, the exact payable premium differs from one car model to another.

Here’s a list of the consumables that are usually covered by most of the insurers under their Consumables Cover Add-on.

Engine oil
Oil filter
Lubricants
Break oil
Gearbox oil
Nut and bold
Screw
- Distilled water
- Grease
- Bearing
- Washers
- Clip
- Air conditioner gas
- Other similar items

Here’s an Example:

The Top Benefit of a Consumable Cover Add-on in Car Insurance:

The top benefit of a motor vehicle Consumable Cover Add-on is that you do not have to pay for the consumables used while repairing the damaged car – the insurance company handles that as well along with the repair bill. By paying a marginal amount to purchase the Add-on, you get the benefit of not worrying about paying for the consumables.

Private Car Package Policy Add-Ons Consumables:

You can purchase the Consumables Cover Add-on for your private car by including the Add-on in your Comprehensive Car Insurance plan.

Special Conditions:

The cover will consider only those consumables mentioned in the policy document.

Documents Required:

There are no specific documents needed to purchase this Add-on online unless specified otherwise. For claim settlement, you will need an active Comprehensive car insurance policy showing the Add-on as inclusion, and the repair bill for reimbursement claim.

Private Car Package Policy – Consumables – 3 Years:

The Add-on can be purchased as a part of the 3-year package policy as well.

Special Conditions:

Consumables will be considered as per the policy’s terms and conditions.

Documents Required:

No documents are required for online purchase. For claim settlement, submit an active Comprehensive plan featuring the Add-on cover.

Private Car Policy – Add-ons – Consumables Bundled:

Insurers might offer the Consumables Cover Add-on bundled with a Comprehensive plan.

Special Conditions:

The insurance company will only consider those consumables that are included in the Policy Wordings.

Documents Required:

Usually, no documents are required to buy this plan online. For claims, you will need an active Comprehensive plan with the Add-on cover.

Commercial Vehicle Package Policy – Add-ons-Consumables:

Commercial vehicles such as cabs, tourist vehicles and other such passenger-carrying vehicles need to be insured with a Commercial Vehicle car insurance policy. The Consumables Cover Add-on can be purchased with a Comprehensive car insurance plan for a commercial vehicle as well.

Special Conditions:

For claim settlement, only those consumables that are mentioned in the Policy Wordings shall be considered.

Documents Required:

As demanded by the insurance provider while buying or settling claims.

Who Should Opt for a Consumable Cover?

You must opt for a Consumable Add-on Cover if:

If you do not want to pay for costs of consumables like the cost of engine oil replacement in the repair bill.
If you want to stay worry-free about claim settlement of minor repairs and replacements.

Engine Protection Cover in Car Insurance – Benefits

A standard comprehensive car insurance policy solely covers repairs to your car if they are related to some kind of accident. However, there are exceptions. Unless you have an add-on cover specifically added to your car insurance, your car’s engine is not covered. In other words, your regular comprehensive insurance will not cover the repair or replacement of engine or parts such as connecting rods, pistons, etc. When you are thinking of buying car insurance, it is a good idea to check additional coverages because they can be very helpful. Read more to learn about Engine Protection Cover Add-on in car insurance and its benefits.

What is Engine Protection Cover Add-on in Car Insurance?

Bought as additional coverage with the Comprehensive car insurance policy, engine protection cover in car insurance provides coverage towards damages or losses to the insured vehicle’s engine. The add-on compensates you for the replacement or repair of your car’s engine or parts. This can be due to leakage of lubricant oil, water ingression, damage to components such as gearbox, pistons, connecting rods, etc., as well as due to hydrostatic lock, caused when you start the wet engine.

Example Scenario:

Monsoon can be unpredictable sometimes and can cause severe damage to the engine of the car if water enters. Replacement or repair of engine parts could cost you a lot of money. In such situations, the Engine Protection Cover can come to your rescue since the regular comprehensive car insurance does not cover the engine and its parts.

How Does It Work?

To understand how the Engine Protection (EP) in car insurance, here is an example of how the add-on works:

Suppose you have left your home closed as you are visiting your native place for a vacation or a function and there is a heavy downpour. Your neighbour calls you to inform you that the rainwater has entered your house and your car has submerged in the rainwater. This is a case wherein water ingression is bound to occur.

The cost to repair or replace engine parts such as pistons, connecting rods, gearbox parts, etc. is about Rs.1,20,000. With just the standard comprehensive policy, these parts are not covered and hence you will have to pay it from your pocket. However, if you had bought the Engine Protection Add-on by paying a slightly higher premium, you could have avoided paying from your pocket. The insurance company will cover the cost based on the additional coverage.

Generally, the cost of the engine protection add-on is about 2% of the current market value of the car, this also depends on the model of the car. With the engine covered under the additional coverage, you can save a lot of money by getting the insurance company to bear the engine repair bill.

Features and Benefits of the Car Engine Protection Cover:

he Engine Protection Cover is in addition to the regular comprehensive cover with unique features and benefits. The insurance company will reimburse up to the amount specified in the policy for expenses towards repair or replacement of engine parts that are damaged. Below are the features and benefits of Car Engine Protection Add-on:

Damage due to leakage of lubricating oil inside the engine is covered.
Damages caused due to water entering the car engine.
Physical damages to components of the engine such as gearbox, pistons, connecting rods, etc.
Damages arising out of a hydrostatic lock, caused when trying to start the car when the water has entered the engine.
Beneficial, especially during monsoons, flooding, natural calamities, etc.
It is also beneficial if you have bought a new car or if you have an expensive car since the bill for engine repair or replacement of parts can be expensive.

Exclusion of Engine Protection Add-on:

Like all insurance policies, there are some exclusions in the Engine Protection Cover add-on. Read on to find out what is not covered in the Engine Protection Cover Add-on:

1. Force-Start the Engine

When the car is submerged in the water, there is a good chance that water has entered the engine. Do not start the engine forcefully, this can lead to rejection of the claim.

2. Consequential Damages

The policy will not cover consequential damages or losses if the insured vehicle is driven after an accident. Insurers tend to reject the claim during such incidents.

3. Limited Claims

the policy period, the policyholder can raise only two claims against the Engine Protection Add-on. This add-on is offered with limited validity.

4. Car’s Age Limit

The add-on is not available for cars older than 5 years. Hence, it is limited only to cars which are not more than 5 years old.

Engine Protection Add-on Can Be Ideal for You:

When do you buy engine protection cover along with comprehensive car insurance? This add-on is an excellent add-on for you:

If you live in a flood-prone area.
If you own an expensive car.
If you bought a new car.
If you want to cover all risks and not leave it to chance.
If you are looking for that extra cover for the engine too.

Please note that the coverage differs between insurance companies. It is essential to read the terms and conditions carefully before opting for the same.

Private Car Package Policy – Add-ons: Engine Protect

The insurance provider will reimburse the cost to repair or replace engine parts such as gearbox, pistons, connecting rods, etc. However, there are some exclusions for private cars as well. Below are the details:

Exclusions

Damages due to normal wear and tear.
Not informing the insurance company.
If the driver is found driving the insured vehicle under the influence of alcohol or intoxicating substances.
If the driver was found to have an invalid driving licence or does not have a DL.
If the damage was due to illegal racing.
Any claims which are covered under other types of insurance policy with another insurer or warranty which includes a recall campaign.
Cost of lubricants in case of damage to the engine arising out of leakage.
Repair carried out without informing the insurance company will not be considered.

Commercial Vehicle Package Policy – Add-on: Engine Protect

The Engine Protection add-on is available for commercial vehicles as well. Here are the exclusions of the add-on for commercial cars or vehicles:

Exclusions

Damages due to regular wear and tear.
Repair or replacement is done without informing the insurance company.
Damages to the engine or its components while driving the vehicle under the influence of alcohol or other intoxicating substances.
Damage arising out of an accident and the driver is found to be underage.
Damage due to an accident when the driver does not hold a valid driving licence.
Damages, losses or corrosion due to water ingression due to delay in informing the insurance company.
Any claims which are under the car manufacturer’s warranty period or under any recall scheme.
Cost of lubricants in case of a claim for leakage or flushing of consumables.
Any repairs carried out without informing the insurer.

How To Claim Car Insurance for Engine Protection Add-on?

To raise a claim to repair or replace components of your car engine is similar to the process to raise a claim for your comprehensive car insurance. By following a few steps you can register a claim car insurance for engine protection cover:

Step 1:

Inform your insurance company about the damages or losses to your car’s engine components.

Step 2:

The insurance provider will assign a surveyor to assess the damage to settle the claim.

Step 3:

You can get a reimbursement for the repair bill towards the repair or replacement of engine parts such as pistons, connecting rods, gearbox, etc.

Who Should Buy the Engine Protection Add-on Cover?

An engine protection add-on is an additional coverage to your regular comprehensive car insurance policy. Since it is an exclusive cover, here are a few reasons why or why you should buy the add-on cover:

If you are living/working in a flood-prone area and there are chances of flooding.
If you bought a new car or an expensive luxury car, the engine components are expensive to repair or replace.
If you want to avoid financial risks and not take chances, the engine protection cover provides an extra layer to the standard car insurance policy.

Car Engine Maintenance Tips

It is always prudent to take care of your car and avoid unwanted loss or damage. Here are a few car engine maintenance tips to keep it running in excellent conditions:

Check car engine oil levels regularly to avoid any unwanted damages to the internal components of the engine.
Do not miss servicing your car as per the schedule and ensure you change parts such as air filters whenever required. This will ensure your car engine is in good condition at all times.
Do not stress the engine out by accelerating higher or overheating it, it may cause irreparable damage to the engine components thereby reducing the engine life.

What is Key Replacement Cover in Car Insurance

Key and Lock Replacement in Car Insurance:

Modern cars, especially luxury cars, are equipped with a keyless Frequency Operated Button (FOB) or remote key lock system. With the FOB, you don’t need a car key to open the lock or start the car’s engine, it is electronically controlled, and with a push of a button, you can either start or stop the engine of the car.

With advanced technology such as FOB, high-end car keys are expensive to replace. While most insurance companies provide cover for lost keys, they do not offer protection against car lock. However, you can talk to your insurer to understand if they provide both key and lock replacement cover and choose the right plan for your car and its key.

What is Key Replacement Cover in Car Insurance?

Car keys have evolved over the years. They are not just a metal piece with grooves to unlock or start the car engine. Sophisticated and technologically advanced car keys are the new norm, especially the electronic keys. They are known as Frequency Operated Buttons (FOBs). If they are lost or misplaced, replacing them is quite expensive. Insurance companies are evolving along with modern times and are covering such car keys through the option of add-on covers. The coverage for your car keys is known as Key Replacement Cover in car insurance.

Key Replacement Cover is an Add-on to your car’s Comprehensive insurance policy and not a standalone cover. With an additional premium, the Key Replacement Add-on will cover the cost arising out of the replacement of the insured vehicle’s key. This can be if the key is lost, damaged or stolen, or the cost to repair the lock-set if the lock or the key are damaged.

The benefits of this Add-on are subject to the terms and conditions listed below:

A First Information Report (FIR) with the police needs to be filed to support the claim.
The replaced key/lock/lockset should be of the same kind and nature.
The insurance company should be intimated immediately no more than 30 days.
The key replacement will be for damaged or broken keys. In case it’s stolen, the entire set of key, lock and lockset will be replaced.

The exclusions are listed below:

Any damage or loss to keys/lock/lockset arising out of malicious activities or any deliberate or criminal act.

Any damage or loss covered under the manufacturer’s warranty.
Any claim where there are no valid receipts or invoices for the payments made.
Any damage or loss due to radiation or hazardous properties.
Any damage or loss to any part of the insured vehicle apart from the keys/lock/lockset and its associated parts such as ignition system, an immobilizer, alarm or infra-red handset attached to the FOB.

Benefits of Key Protection Add-on Cover:

Below are the benefits of the Key Protection Add-on Cover:

Replacement of the car key/lock/lockset of the same kind and type in case it is lost, stolen or damaged.

Key replacement in case of theft or burglary and the lockset will be replaced in case of theft or damage.
Easy online experience.
Will not affect the policyholder’s eligibility for an NCB (No Claim Bonus) at the time of renewal.

Why is Car Key Insurance Important?

The Indian car market has evolved over the years. New and sophisticated technology is increasingly being used by car manufacturers to offer safer and feature-rich vehicles. One of the advancement is the key, lock and the lockset. While luxury cars featured some of these technologies, affordable and economical car manufacturers have started to offer them in some of the best or mass selling vehicles.

One among them is the keyless Frequency Operated Button (FOB) or remote key lock system. The technology controls several functions such as the car’s lock and unlocks functionality without the need for a physical key. Through a push of a button, you can either start/stop your car’s engine. Advanced technologies such as this are expensive to replace or repair.

Types of Car Keys:

There may be situations when you may need to replace your car keys. The key may be damaged or broken, or stolen. Knowing what type of car keys you have is beneficial when it is being repaired or replaced.

Basic/Traditional Car Key: The basic machine cut with almost no security features and can be easily duplicated by a locksmith.
Remote Car Key: This type of key boasts of some security features with a transponder which emits radio waves or infrared to lock or unlock the car. Replacement of remote keys is expensive due to the work involved in reprogramming the security features.
Smart Car Keys or Keyless Frequency Operated Button (FOB): Through sensors, the car can sense the key nearby and it automatically unlocks the door without the need for you to physically unlock the door.

Why Replacement of Keyless FOB/Remote Key is Expensive:

The FOB includes security features of the key to your car. If it is damaged, stolen or lost then you should replace it. The remote key has a unique computer-generated code which is programmed to match with the code present in the locking system of your car. Apart from the basic lock/unlock feature, depending upon brands and models the features can vary and the cost can increase based on the number of features it presents.

Hence, the more the features, the more it costs to replace or repair the keyless FOB or remote keys. A Key Replacement Add-on will cover against these high expenses since they concern the security aspect of your car.

What Does Car Key Cover Include:

Car Key Cover or the Key Replacement Cover is an Add-on to the Comprehensive insurance policy. The insurance company will reimburse the insured, up to the insured amount specified in the insurance policy for the purpose of replacing the insured car’s key if the key is:

Lost
Stolen
Damaged
Repairing of the lockset if the lockset or the key is damaged.
Key replacement only in case the key is damaged or broken.
In the case of burglary, the key, lock and lockset will be replaced.

Cost of Car Key Replacement Insurance:

The premium towards Key Protect Add-on is lower compared to the original cost to replace the damaged lockset. The remote key or the keyless FOB is expensive to replace. Paying a small amount for the Key Replacement premium can cover the high replacement cost of the lockset. However, this amount is subject to the maximum sum insured you have opted for.

Private Car Package Policy – Add-ons: Key Protect

By paying a slightly higher premium for the additional coverage for the car keys, the car insurance policy comes with special conditions and exclusions. Below are the details:

Special Conditions:

NCB will not be affected at the time of renewal if you raise the claim towards the replacement or to repair your car keys.
In case the car key is stolen or burglarized, it should be supported by an FIR.
The replaced car keys, lock or lockset should be of the same model or kind for which you are raising a claim.
You need to report the loss of the car keys within 30 days of such a loss or damage.
In case the key is broken or damaged, only the key will be replaced.
In case of theft of the keys, the insurance company will replace the entire set which includes the key, lock, and lockset.

Exclusions:

The claim will be rejected if the damage or loss of the car keys, lock or lockset is because of malicious activities, criminal or deliberate acts.
Any damage or loss covered under the car manufacturer’s warranty.
In case invoices or receipts of payments towards the replacement/repair of the car keys are not produced, then the claim will be rejected.
In case the damage or loss is due to radiation, radioactive contamination or the hazardous properties of any explosive, invasive, corrosive or toxic substances or material, the claim will be rejected.
In case of any loss or damages to your car other than the keys of the insured vehicle, its associated lock, infra-red handset, ignition system, any immobiliser and/or alarm of the key FOB, then the claim will be rejected.

Commercial Vehicle Package Policy – Add-ons: Key Protect

Key Protect add-on cover can be bought for commercial vehicles, passenger carrying vehicles, taxis, etc. Similar to the private car package, the commercial vehicle key protection add-on also comes with special conditions and exclusions. Below are the details:

Special Conditions:

NCB remains intact despite raising a claim to replace or repair the car keys. However, if you do raise a claim for damages to other parts of the insured vehicle, subject to the terms and conditions, the NCB will not be provided.
In case the claim is due to theft or burglary, it should be supported by an FIR.
Since this add-on reimburses the cost to replace or repair the car keys/lock/lockset, the replacement should be of the same nature and kind.
You need to inform the insurance company within the stipulated time mentioned on the terms and conditions. Usually, it is 30 days from the day of any loss or damage to the insured vehicle’s keys/lock/lockset.
In case the car key is broken or damaged, a replacement of the key (s) will be provided. However, in case it was stolen, the entire set will be replaced.

Exclusions:

If the car key(s) is damaged or lost due to malicious activities, criminal or deliberate acts by the insured, the claim will be rejected.
Any damages or loss covered under the car manufacturer’s warranty period or any service contract, the claim will be rejected.
If the policyholder is unable to produce receipts or invoices for any payments, then the claim will be rejected.
Also, your claim can be rejected if the damage or loss is due to radiation, hazardous properties of any corrosive, invasive, toxic substance or material, or due to explosives.
In case of damage or loss to other parts than to the keys or associated parts such as lock, ignition system, infra-red handset, any immobiliser and/or alarm attached to the FOB.

Claim Process for Key Replacement Cover:

The claim settlement process is similar to replacing the lockset from an authorized OEM or from a regular car workshop. Below is the claim process for key replacement:

Step 1:

Get your car lockset repaired or replaced.

Step 2:

Submit the invoice or bill of the replaced remote-lock system to the insurance company for the reimbursement process.

Step 3:

Depending upon the cost of replacement, subject to the maximum sum insured, your claim will be settled.

What is No Claim Bonus (NCB) in Car Insurance?

What is No Claim Bonus in General Insurance?

The insurance industry has two significant aspects – Life Insurance and General Insurance. For a basic understanding, things that do not fall under the Life Insurance bucket can be classified under General Insurance. Therefore, Vehicle Insurance, Travel Insurance, Health Insurance, etc. are a part of the General Insurance segment. NCB’s full form is No Claim Bonus and applies to both segments.

NCB plays a crucial role in vehicle insurance (known as bike and car insurance No Claim Bonus) as well as health insurance, as these are long term policies. Travel insurance is usually trip-related and those who buy annual policies belong to a niche category, therefore NCB is not popular over there. On the other hand, people opting for vehicle insurance and health insurance are on the higher side and NCB helps them to save money as it leads to a sizeable discount on their policy’s premium during renewal.

What is No Claim Bonus (NCB) in Car Insurance?

You drive safely for a year and make no claims during the policy period. Your policy period is about to end and it is time for insurance renewal. Your insurer acknowledges the fact that you are a safe driver and wants to reward you for not raising a claim. Thus, the insurer offers you a discount while renewing your policy. This reward is termed as a bike and car insurance No Claim Bonus.

Benefits of NCB in Car Insurance:

Here are the major benefits associated with NCB.

1) Discount:

NCB will help you to fetch a discount on policy renewal. This means you will have to pay less premium compared to what you would have paid if you had raised a claim during the policy period.

2) High Savings:

NCB is incremental if you follow the rules. Therefore, you can get a sizeable discount on policy renewal for years if you do not raise a claim consecutively for five years and renew your policy in time.

3) Transferable:

NCB is associated with the car owner and not the car. Therefore, you can carry forward the NCB if you plan to sell your old (insured) car and buy a new one. NCB also stays with you if you choose to port your policy from one insurer to another.

How Does NCB Work?

NCB works just like every other bonus is intended to work. First, it is a reward and second, a motivation to keep repeating the good performance. Thus, by providing the NCB in car insurance, insurers encourage you to drive safe and discourage you to raise claims. This way, a car insurance policyholder will think twice before raising claims for trivial issues.

Why is NCB So Important in Car Insurance?

NCB is important in car insurance because car owners spend a considerable amount on Comprehensive car insurance during the lifetime of the vehicle. The more the value of the car, the higher the premium. Since NCB helps to reduce the premium, it becomes an important feature for the car owner.

No Claim Bonus Calculator:

If you are wondering how NCB in Car insurance is calculated, the following paragraphs will give you the answer.

If you do not raise claims for five consecutive years, you gain a 50% discount on insurance premium. However, the percentage will reset to zero once you raise a claim. In simple words, as a policyholder, you get a discount on the payable premium for the subsequent year of the policy, considering you do not claim during that period.

For instance, if you do not lodge a claim in the first year of your policy, you will get a 20% discount on the premium of second-year policy. It’s an assured way to save money on the car insurance policy premiums. You earn discounts for every claim-free year.

NCB Slab:

Below table will show you the NCB slab on the number of claim-free years:

Claim-free renewals (years)

On first claim-free renewal

On second claim-free renewal

On third claim-free renewal

On fourth claim-free renewal

On fifth claim-free renewal

Discount on Premium

20%

25%

35%

45%

50%

NCB Rates %

Vehicles over and above 5 years of age will retain a 50% discount on the premium if the owner does not claim.

NCB Discount on Your Premium Calculation:

Here’s an example: Mr A and Mr B bought expensive vehicles of the same make and model. Both paid Rs. 22,000 to insure their vehicle for the first year. For the second year, the premium would reduce to Rs. 20,000 due to a reduction in the value of the vehicle.

Mr A did not raise a claim during the policy period (first year) but unfortunately, Mr B was involved in a car accident and had to raise a claim for damages. Therefore, Mr A received a 20% discount on the premium payable for the second year (first claim-free renewal) but Mr B did not receive the discount as his NCB was zero.

Calculation

Premium for the first year

Premium for the second year(first claim-free renewal)

Premium After NCB calculation

Mr A

Rs. 22,000

Rs. 20,000

Rs. 16,000 (NCB 20%)

Mr B

Rs. 22,000

Rs. 20,000

Rs. 20,000 (NCB 0%)

Note: The above example is just for explanatory purposes. NCB is calculated on the Own Damage component of the payable premium and not the overall premium.

Here’s an interesting option. If you opt for an NCB Protection Add-on, you can raise a claim and still qualify for the renewal discount. You will have to pay the NCB Protection cover’s premium to avail its benefits.

When Is No Claim Bonus Applicable?

No Claim Bonus is applicable at the time of policy renewal and only on the ‘Own Damage’ component of your car insurance policy. Own damage, as the name suggests, is the damage done to the insured car. Another component of car insurance is the Third-party liability cover, buying at least this component is mandatory as per Indian law. It is beneficial when a major accident is caused by the insured car in which third party property is damaged or a person is injured.

Financial protection against damage to the insured car is offered by a Comprehensive car insurance policy. Thus, NCB is applicable only on a Comprehensive policy and not on a Third-party Liability policy.

NCB Protection Cover as Car Insurance Add-on:

If you go for a Comprehensive Car Insurance policy, you can choose appropriate Add-ons for wider coverage. The NCB Protection Cover (Add-on) is designed to keep your NCB component – which is the protected No Claim Bonus – active even if you claim during the policy period. Note that the number of claims one can make are according to the terms and conditions. Usually, two claims are allowed in a policy year with this Add-on.

How Much Does A No Claim Bonus Protection Add-On Cost?

The cost of NCB Protection cover will be in the range 5-10% of your policy premium.

Who Should Opt for A No Claim Bonus Protection Cover?

The NCB protection cover can be beneficial for:

Anyone who owns a car and a comprehensive car insurance policy.
Anyone whose car is vulnerable to damage and therefore is likely to raise a claim. For example, damage due to flooding.
Anyone who has a car for more than 2 years and doesn’t want to lose the NCB.

How to transfer NCB to New Car Insurance?

No Claim Bonus is a reward offered to the policyholder for not raising a claim. This bonus is given as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI). Even if you decide to buy car insurance from another insurance company or buy another car (after selling the current one), you can claim the NCB accumulated in your name.

You will need a No Claim Bonus Transfer certificate from the insurance company to be able to continue the benefit. Just remember that there should not be a gap of more than 90 days between the expiry date of your insurance policy and renewal. NCB transfer rules suggest that the benefit cannot be transferred to a new owner of the vehicle in case of a sale, as the NCB is associated with the car owner and not the car.

Documents Required to Transfer NCB:

Here’s a list of documents that are needed during the NCB transfer. Note that different insurance companies might ask for a different combination of the following documents.

Application for NCB transfer.
Copy of the car’s insurance policy.
Sales agreement.
Booking receipt in the case of purchasing a new car.
NCB certificate from the insurer.

How to Retain No Claim Bonus After Making A Claim:

If you want to retain your No Claim Bonus even after making a claim, you need to buy the NCB Protection Add-on along with the Comprehensive policy. Usually, with that add-on, you can raise two claims in a policy year without losing the accumulated NCB.

What do IDV and NCB mean in insurance?

IDV and NCB are two terms that are closely associated with car insurance premium calculation. IDV = Insured Declared Value. It is the value of the car taken into consideration for premium calculation. As NCB is a discount that comes into action after a no-claim policy period, it affects the premium calculation during policy renewal.

Things to remember about NCB in India:

Listed below are important pointers related to NCB in India.

When is NCB Terminated? – Either on non-renewal of policy (within 90 days of policy expiration) or if a claim is made without the NCB protection Add-on.
NCB and Claim – If you raise a claim without the NCB protection Add-on, then the NCB resets to zero.
NCB for Commercial Vehicles – Please refer to the policy document for details as the terms and conditions for NCB in the case of commercial vehicles might vary from one insurer to another.
NCB Proof – The NCB certificate obtained from the insurer can be the NCB proof.

Why Should We Opt for No Claim Bonus Protection Cover?

An NCB Protect cover gives you extra cushioning. It keeps the bonus component intact even if some claims (depending upon the terms and conditions) are raised during the policy period. You can opt for NCB protection cover to benefit from the renewal discount irrespective of a claim (or claims) during the policy period.

Return To Invoice Cover (RTI) in Car Insurance – Check Benefits and Examples

People are familiar with what is car insurance, its benefits, or even coverages and exclusions for that matter. Car insurance will financially protect you in case of an unfortunate incident involving the insured vehicle. However, a car insurance policy is not just about financial protection when a liability occurs, it can prove to be of great help if you ensure certain things while buying the policy. One such beneficial coverage is the Return to Invoice Protection Cover Add-on. In this article, we will discuss various aspects of this additional coverage. Take a look:

What Is RTI In Car Insurance?

RTI is an abbreviation for “Return To Invoice”. The literal meaning of these words is going back to the original value mentioned on the invoice of a product.

The Return to Invoice (RTI): When Return To Invoice in car insurance is concerned, it means that the insurance company will return the value of the car approximately equal to the one mentioned on the original invoice of a car in case of a major damage. RTI in car insurance is additional coverage that an owner can purchase while buying a car insurance policy. The decision to include Return To Invoice in car insurance lies with the owner of a car and is not mandatory by law.
Insured Declared Value (IDV): This is the current value of a car. IDV is supposed to be declared by the car owner while purchasing a new policy or during the process of policy renewal. It is ideal to set the IDV of a car approximately equal to the current market value of a car. Setting a high value will increase the cost of a policy and setting a lower value will decrease the sum insured.

Benefits of RTI (Invoice Protection) Add-on Cover:

The Return to Invoice Protection Add-on can be beneficial in various ways. It can prove to be a great financial help in the time of need and one does not have to endanger their savings for buying a car. Here is a list of advantages of RTI in a car insurance policy:

1. Increases The Scope of Coverage:

Return to Invoice is an Add-on, that means it is an additional coverage that you will buy with your car insurance policy. Add-ons increase the scope of coverage and make it customized. Since it is not free coverage, not everyone chooses to buy this cover.

2. Is Available For New Cars

Some people take extra care of their new car as compared to an old one. Thus, it is also true that it is more emotionally draining if a new car gets into an accident of any sort and damage is caused. However, if one has purchased the RTI add-on while buying car insurance, he/she can be worry-free in case of major damages.

3. Beneficial In Case of Theft

Car theft is common in India. Someone with a malicious intention can steal your car. All the money that you spent on buying a brand-new car will go in vain without the RTI coverage.

4. Beneficial In Case of Total Loss

Total loss is a situation where a car is so damaged that repairing it would cost more than its resale value. Thus, it would be better to salvage the car and keep what little amount you receive. RTI can prove to be a boon in such a situation. It will help you get the entire value of the car without worrying about damage, repairs, or salvage.

5. Available With Own Damage

A car insurance policy can be of two types. First is the basic Third-party Liability coverage and the second is a Comprehensive policy that offers multiple coverages. The Return to Invoice Add-on is available with a Comprehensive car insurance policy i.e. Own Damage cover. Thus, you can increase the benefit offered by a Comprehensive policy with the help of RTI.

How Does Return To Invoice Cover Work?

The Return To Invoice cover instantly springs into action when your car experiences damage beyond repair i.e. total loss or when your vehicle gets stolen. There could be a number of reasons that could cause a car to be considered as a total loss. Here are a few:

Fire: A damage of high magnitude is caused if a car explodes due to fire.
Floods: Water may enter important components of a car and damage it to a great extent.
Landslide: Large rocks, trees, and debris can crush the vehicle and damage it beyond repair.
Accident: An accident, especially with a larger vehicle can cause a total loss.

This is when you can make a claim against the Return to Invoice add-on of your car insurance policy. Note that without this cover, you would be liable to only the IDV of the car in a total loss or theft situation.

When Is The Return To Invoice Cover Applicable?

Depending upon the insurance company, the Return to Invoice cover is applicable to cars that are less than 3 to 5 years old. One can make a claim against this cover only in case of total loss to the insured car. Submitting the original invoice of the car may be necessary at the time of claim.

When Is The RTI Cover Not Applicable?

The Return to Invoice cover is very useful for those who buy it with their Comprehensive car insurance policy. Since it is so beneficial, it can be purchased only under certain conditions. Here is a list of situations where the RTI cover is not applicable.

Third-party (TP) Liability Policy: The Return to Invoice cover is not applicable to a TP policy because Own Damage coverage is not applicable in this type of car insurance.
Older Cars: After a certain number of car insurance renewals, the policyholder will not be allowed to purchase the RTI Add-on. This number of years depends upon the terms and conditions of the insurance policy.
Minor Damages: The policyholder cannot make a claim against his/her RTI add-on for any damage other than total loss or theft. Even if a claim is raised, the RTI will not come in force for minor damages to the car.

How To Calculate RTI?

It is very easy to calculate the sum insured associated with Return To Invoice Cover in India. To know the claim amount against your RTI cover simply take a look at the amount on the invoice of your car. The claim amount can be approximately equal to the amount on the invoice. This is how you can calculate RTI.

How Much Does Return To Invoice Costs?

Return to Invoice is additional coverage that you can choose to buy along with your comprehensive car insurance policy. Since it increases the scope of coverage it will also increase the cost of a policy. You can expect to pay around 10% more premium if you buy the Return to Invoice. This cost is usually negligible as compared to the sum insured that RTI offers in the time of need.

Example of RTI In Car Insurance:

Here is an example that will help you understand how a claim against RTI is paid:

Situation:

Consider you have bought a brand-new SUV for your family. The cost of this car is 15 Lakh rupees.
You spent a little more than one year driving it and enjoyed these drives to the fullest. The age of your car is 1 year and 2 months.
Consider, you live in a flood-prone area and your parked car was submerged in water for a long time.
Your SUV has suffered irrevocable damage (total loss) and now you need to make a claim.

Result:

The following table will show how your claim is settled against total loss with and without Return to Invoice Add-on:

With RTI Cover

Consider you bought the Return to Invoice cover while renewing your car insurance policy.

You are stress-free as you have made the right decision of buying RTI.

Your claim amount is approximately equal to the invoice value of the car i.e. 15 Lakh rupees.

You did not suffer any loss virtually.

You bought the exact same model with the claim amount.

Without RTI Cover

Consider you did not buy the Return to Invoice cover while renewing your car insurance policy.

You are stress-full as you will suffer a loss now.

Your claim amount is approximately equal to the current IDV of the car i.e. 12 Lakh rupees.

You suffered a loss of 3 Lakh rupees.

You had to shell 3 Lakh rupees from your pocket to buy the same model again.

Who Should Opt For A Return To Invoice Protection Cover?

One can buy many car insurance Add-ons with their policy. However, every Add-on is not beneficial to every policyholder. Thus, it is said that a person should first assess his/her personal requirements and then buy a car insurance Add-on.

For example, buying an Accessories cover and having no additional accessories in the car will be a waste of coverage and money. Similarly, buying a Return To Invoice cover will not be beneficial for everyone. Here is a list of profiles that are suitable for purchasing the RTI Add-on:

Who

Owners of new cars

People who reside in a theft-prone area

People living in areas where natural calamities are common

Why

Because the Return To Invoice cover is available for new cars

Theft is claimable against RTI

Natural calamities can cause total loss which is covered under RTI

Validity of The Invoice Protection Cover:

Any add-on bought with a car insurance policy is approximately valid for one year. Likewise, the Invoice Protection Cover will also be valid for one year after which the policyholder needs to renew his/her car insurance policy.

Note, it is also possible that an insurer decides to increase or decrease the validity of the policy. Thus, it is a good idea to take a look at the policy document for the mention of an expiry or renewal date.

Which of The Add-on Covers Is Better? ZERO Depreciation Or RTI?

As mentioned earlier, an Add-on should be chosen to suit a personal requirement. When a person decides to buy a ZERO Depreciation or RTI cover, he/she should consider certain factors that will decide the usefulness of an Add-on. When in doubt, ask yourself the following questions:

Question	Yes/No	Return to Invoice	Zero Depreciation
Do I have a brand-new car?	Yes	✓	✗
Do I have a brand-new car?	No	✗	✓
Are there chances of car theft?	Yes	✓	✗
Are there chances of car theft?	No	✗	✓
Are natural calamities common in the area where I live?	Yes	✓	✗
Are natural calamities common in the area where I live?	No	✗	✓
Am I a rash driver?	Yes	✓	✗
Am I a rash driver?	No	✗	✓