Motor insurance is mandatory by law. So, at the time of buying a vehicle, the motor dealer gives us an insurance policy as well, which we need to renew every year. But how many of us care to check the policy details? Not many. And it’s only when the vehicle is stolen or suffers damages in an accident, and we file for an insurance claim that we realise the inadequacies of the policy to cover all costs involved.
Motor insurance can be divided into two broad categories. First, Third Party insurance which is meant to give protection against any third party liability; and second, Comprehensive insurance which protects against third party liability as well as theft or any damage caused to the owner and the car in an accident. But there is a catch here too: the so called comprehensive policy also does not cover many things such as consumables, file charges, depreciation cost, etc. The list of exclusions is rather long so it is advisable to spend a few minutes on researching what a good motor policy should include. The following is a list of add-ons which make a policy really comprehensive, that too at a nominal cost:
Engine Protection Add-on
One disturbing feature of a standard car insurance policy is that it does not cover protection against damage to car engine caused due wear and tear, water ingression, etc. For instance, if you are outside on a rainy day and water gets into the engine of your car, and damages it, a standard car policy would not give you the cost of its repair. Similarly, any damage caused to the engine due to the driving of the car without engine oil, or due to road bumps, will not be payable by your insurer. Since engine repairs cost a lot of money, anywhere between Rs 20,000 to Rs 50,000 for a medium sized car, one must think of buying the engine protection add-on cover tailored specifically to cover engine damage caused due to water ingression, leaks etc. Regular servicing of the vehicle can keep a check on the leaks but you cannot control the weather which makes this add-on a must have insurance feature to save a substantial amount of money at a nominal premium cost of 0.15 per cent to 0.20 per cent of the Insured Declared Value (IDV).
Zero Depreciation Add-on
Continuous use of any machinery over time leads to a decrease in its value. Same is the case with a car or its parts. So in case of an accident, the insurer gives only the depreciated value of the parts that need to be replaced, not the current market price of the parts. To guard against arbitrary fixing of depreciation rates by insurers, the Insurance Regulatory and Development Authority (IRDA) has, after taking into consideration the age of the car and the type of parts need to be changed, set guidelines for insurers to work out depreciation value. For example, if the front bumper of your car gets damaged in an accident and needs to be replaced with a new one, the insurer will give you only 50 per cent of the cost of a new bumper because depreciation on plastic parts is 50 per cent. The following table gives the depreciation rates of some motor parts:
| Depreciation Chart | |
| Repair Type | Depreciation |
| Paint Job | 50%* |
| Rubber/ Nylon/ Plastic parts, and Batteries | 50% |
| Fiberglass components | 30% |
| Glass components | Nil |
For all paint jobs, depreciation rate is 50 per cent for the cost of the material required for the paint job. If a single amount is charged, then, material cost is considered 25 per cent of the total charges, and accordingly 50 per cent of that amount is calculated to be the depreciation value.
To help customers overcome the problem of depreciation costs, most motor insurers offer a Zero Depreciation add-on which generally costs 0.4 per cent to 1.5 per cent of the vehicle’s IDV.
Consumables Add-on
After an accident, when you take your car to the service centre for repairs, a number of items such as missing nuts & bolts, engine oil, coolant, brake fluid, brake pads and many other such things are required to be replaced. These items cost a significant amount of money pushing the overall repairs bill substantially. For instance, in a mid-level car, cost of engine oil may be anywhere between Rs 2,000 to Rs 4,000, coolant Rs 350 to Rs 500, and brake fluid Rs 200 to Rs 250. The cost of all these consumables are not covered under a standard insurance policy, and the car owner has to bear these expenses from his/her pocket. The way to cover such significant expenses is to buy consumables add-on with the policy by paying a nominal additional premium which may vary from Rs.200 to Rs 800 depending on the IDV of your vehicle.
NCB Protector Add-on
No Claim Bonus (NCB) is a discount insurers give on the own-damage premium component of a comprehensive motor insurance policy for not filing any claim in the previous policy year. And the percentage of this discount keeps going up year after year till no claim is made. (Please see the table). However, the discount cannot go beyond 50 per cent which is applicable after 5 years of no claim. Since own damage premium is 80 per cent to 90 per cent of the total premium, there can be substantial savings in the form of NCB. The below mentioned table gives NCB slabs as per number of years of no claim:
| All Types of Vehicles | % of NCB on OD premium |
| First policy year | NIL |
| After no claims in first year | 20% |
| After no claims in consecutive two years | 25% |
| After no claims in consecutive three years | 35% |
| After no claims in consecutive four years | 45% |
| After no claims in consecutive five years | 50% |
The keenness to keep NCB intact, sometimes puts one in a dilemma whether to stake insurance claim or not, particularly when the total repairs cost is not much. Most insurers have found a way out of this dilemma by offering a protector add-on at a cost of Rs 800 to Rs 1000. This add-on keeps the NCB slabs unaffected even in the event of claiming insurance. However, it is advisable to opt for this add-on only when you have accumulated 20 per cent or more NCB because there is no point in purchasing it in the first year when NCB is 0 per cent. Moreover, this add-on can be purchased only if the vehicle is not older than 3 years. Under NCB add-on some insurers allow even more than one claims.
Roadside Assistance Add-on
Some situations may put drivers, particularly women and senior citizens, in a troubled spot. Suppose you are going for an urgent work and your car runs out of petrol, or your car’s tyre goes flat, or your vehicle breaks down for some reason at a secluded spot -- in all such situations you have to go through unnecessary trouble spending extended hours on finding appropriate solutions. Keeping such situations in mind, insurers have started offering Roadside Assistance add-on which makes it incumbent on the insurer to come to your help immediately. Even in the case where, by mistake, you lock your car doors without taking the car key out, your insurer will send an executive to your house to pick the duplicate key and deliver the same to you at the spot where you are stuck. This add-on also comes at a nominal cost of Rs 400 to Rs 800, depending upon the IDV of your vehicle. However, this service is provided by a few insurers only.
Insurance is an investment you make to secure yourself from unanticipated risks in life. Hence, it makes sense to go for the above-mentioned add-ons, particularly because they come at a nominal cost but have the potential to save big amounts.
By-Tarun Mathur- Co-Founder and Director, Policybazaar.com
