To navigate the realm of automobile insurance effectively, it's crucial to grasp the terminologies and jargon used within the industry. Below are key terms and concepts in car insurance you should familiarize yourself with:
Third-Party Liability: This denotes the legal obligation of the policyholder to compensate for damages or injuries caused to a third party (person and/or property) in a road accident.
Deductibles: These are amounts that the policyholder needs to pay out-of-pocket to initiate the claims process. Deductibles come in two forms: compulsory and voluntary.
Depreciation: This signifies the decrease in a car's value over time due to wear and tear. Calculated based on factors like a vehicle's age, mileage, and overall condition, depreciation begins from the vehicle's sale date.
Claim: A formal request made by the policyholder to the insurance company for compensation to cover damages incurred by their vehicle. The process typically involves providing detailed incident information.
Network Garages: Many insurers have partnerships with garages where policyholders can get their vehicles repaired without upfront payments. The insurer directly settles repair bills with these network garages, simplifying the process for policyholders.
Insured Declared Value (IDV): This represents the maximum claim amount that policyholders can receive in case of damage to their vehicle. Influenced by factors like the vehicle's ex-showroom price, age, model, make, and depreciation rate.
No Claim Bonus (NCB): A discount on the car insurance premium given to policyholders for claim-free years. The NCB accumulates annually, starting from 20% and increasing with consecutive claim-free renewals. However, it resets to zero upon making a claim within the policy period.
Understanding these fundamental terms empowers you to make informed decisions regarding your car insurance coverage and navigate the complexities of the automotive insurance landscape effectively.
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