Auto insurance is provided to motor vehicle owners with respect to any financial liability caused by their insured vehicle, by which the necessary payments for compensation of any injury to damage to the property of another person(s) is covered. It protects you from any sudden expenses in case of any emergency with regard to your car if it is covered under your insurance policy, like road accidents, brutal clashes, theft, weather-damage, etc. However, all this depends upon the specific terms and conditions of the policy owned.
Auto insurance has been made compulsory for third party injury or damage by the Law, however various variations have developed in the market over time in this field. Although, in India, where word of mouth holds more credibility than legit information provided by the authorities, Myths are bound to corrupt the Facts.
So here is a list of myths you need to clear out of your head to make space for some proper knowledge about auto insurance.
- Myth: The process of taking/renewing auto insurance is very complicated and inconsistent. Moreover, the Car dealers deal with the insurance too.
Fact: It is extremely simple and convenient, especially online.
You just have to provide minimum necessary details, after which you can find multiple policies to compare and select. This is due to the technological advancement in the market. Especially for renewal, some companies only need a photo of your original documents to give you the necessary quotation.
Also, car dealers don’t deal with your insurance. They only provide it during the sale of a new car for convenience. All the other formalities are covered by the Insurance companies only.
- Myth: auto insurance covers only road accidents, where the owner is at fault.
Fact: Factors of coverage and fault can vary but ensures third party compensation atleast.
Coverage can be extended depending upon your requirements with different policies. (For more information, check the following – Car Insurance: Benefits & Types). Instances like weather-damage, theft, etc. are also covered under certain policies.
Various conditions exist where a claimant can’t enforce the insurance, such as intoxicated driving (drugs or alcohol), using personal vehicle for commercial purposes, etc. Claims should fulfil the conditions of eligibility set out in the insurance policy. Depending upon the type of insurance, role of claimant’s fault affects the coverage.
- Myth: Car owner has to buy a separate policy for the Driver of the insured car.
Fact: Driver must have a valid driver’s license to be covered in the same policy.
According to law, third parties include all others except the contracting parties to the insurance. Drivers also fall under this category, however a key requirement on account of being the Driver of such vehicle is the possession of a valid Driver’s license.
- Myth: Age of the Vehicle is the only factor in determination of Premium Cost.
Fact: Age of the Vehicle, Colour of the vehicle (special colours), Age of the Driver, Make & Model, Cubic Capacity of the engine, Driver’s Record, Usage of the vehicle and its purpose are collectively important.
- Myth: Insurance Company can cancel plans on its own and you can’t change once the company once the policy is bought.
Fact: An Insurance Company can’t cancel or modify an insurance plan without the consent of the Insured at all, while you can change such company once the policy term expires.
- Myth: Amount for repair has to be paid by the owner first and then claim has to be made for its reimbursement.
Fact: Depends on the type of scenario upon which claim is made.
Usually, in cases of repairs in garage or hospital treatments (major issues), the amount is directly provided by the insurance company. However, in certain cases, the amount may have to be paid on the spot, which is then reimbursed to the owner.
- Myth: Safe driving or having an old vehicle means no insurance needed.
Fact: It is compulsory to have auto insurance on the basis that accidents are of highly uncertain nature and may occur in cases of extreme caution too.
- Myth: Insurance policy gets automatically transferred to the new owner after a sale and the previous owner loses his/her NCB.
Fact: Policy has to be transferred with simple but proper formalities, by informing the Insurance provider about the sale. However, the NCB doesn’t get affected.
No Claims Bonus (a benefit earned for making no claims during a year, usually considered in the deduction of subsequent premium costs). Moreover, NCB remains with the previous owner of the policy.
It has to be filed within 3 months from the expiry of the policy, commonly included in the renewal procedure. Usually, it is accounted in the form of a discount in the premium costs.
*Source* – IRDA
- Myth: Policy ensures amount equivalent to the damage sustained or value of a new car where vehicle can’t be repaired.
Fact: Coverage amount depends on the Insured Declared Value and Depreciation in the value of the vehicle till the time of cause of claim.
*Source* – IIB
This chart explains how depreciation affects the insurance amount.
Authentic knowledge is really important while buying an auto Insurance policy and myths have to be discarded with precise and true information about all its relevant aspects. You should pay proper attention to the terms of the policy.