November 11, 2013 1:16:13 am
Any person who owns a motor vehicle,be it a two wheeler or four wheeler,would be aware of the law that for using the motor vehicle in public place he needs to buy an insurance for the vehicle. The Motor Vehicle Act makes it mandatory for the owner of a motor vehicle to buy motor insurance.
As per the law,mandatory insurance is required to cover the liability of the owner of the vehicle towards the third parties who get injured or whose property gets damaged by the use of the motor vehicle. The Act prescribes fine/penalties/punishment for not having valid insurance for the vehicle.
Since a motor vehicle is a valuable asset of a person,generally people opt to cover the vehicle against accidental loss or damage. This is possible by availing a Comprehensive Package policy for the vehicle which covers in addition to the mandatory third party liability,damage to the motor vehicle also.
Points to remember while taking Motor insurance
First and foremost,if the vehicle is new,ensure that the delivery is taken only after a Comprehensive Policy is availed. For new vehicles,in some cases,the manufacturer offers free insurance or the dealer helps in getting the vehicle insured. It is important to check the credentials of the insurer,coverage offered under the policy and the premium charged.
Credentials of the insurer relates to the customer service track record of the insurer. This should relate to policy servicing and promptness in claim settlement.
Nowadays,this can be checked easily taking a feedback from a few of your friends or colleagues. In case you are not comfortable with the insurer which is suggested by the dealer you can indicate your choice or you can yourself avail the insurance through an agent of the insurer or through the online portal of the insurer.
In addition to the standard motor insurance cover,there are add-on covers available which offers extended protection. Nil depreciation or Depreciation buy-back,No Claim Bonus protection,Return-to-Invoice,Increased Personal Accident,Accidental Hospitalisation,etc are some of the popular add-on covers. Return-to-invoice would be the most important add-on cover for a new vehicle as this helps the insured to get the full value of the vehicle in case of a total loss following an accident.
It would be in the interest of the insured to read the coverage offered by various insurers and also look at the fine print to have proper understanding of the terms and conditions.
The premium being charged for the cover is also important. Lesser premium may not be always good for the insured as this may come with a cost,a high deductible (which is the amount will be deducted in the event of a claim) or some fine print restricting the coverage offered under the add-on sections.
Since insurance is for protection in the event of an unfortunate loss,the effectiveness of the coverage and the efficiency of the insurer,which would be tested only at the time of a claim,is more important than minor savings in premium.
No Claim Bonus
In India,all insurers offer No Claim Bonus which is a discount on the premium for claim free years. While renewing a motor policy,it is important to disclose the claim status under the expiring policy if the renewal is being taken from a new insurer.
If you can produce a renewal notice issued by the expiring policys insurer,the new insurer will offer NCB as provided in the renewal notice. If the renewal notice is not available,general practice is that the new insurer allows NCB based on a declaration by the insured regarding claim under the expiring policy.
For example,if the insured did not claim for two consecutive years,he will be eligible for 25 per cent No Claim Bonus (NCB) in the third year. Based on the declaration of no claim in the previous two years the new insurer gives 25per cent NCB. As a practice,the new insurer writes to the previous insurer to confirm the NCB eligibility.
Though in most of the cases the new insurer receives a reply from the previous insurer within a reasonable time frame,sometimes the previous insurer who is not happy about losing the renewal,does not bother to confirm the NCB status.
In such cases the new insurer has two options: He can check in the Insurance Information Bureau (IIB) which has been established by the regulator Irda and confirm the claim experience under the previous policy,or he can ask the insured to approach the previous insurer and get a confirmation.
If it turns out that the declaration provided is incorrect,insurer can either demand additional premium for the new policy in place of the NCB granted or can choose to cancel the policy citing fraudulent declaration by the insured.
In many cases insurers check the authenticity of the NCB at the time of a claim only and if it is observed that the NCB declaration is wrong,the claim can get into a problem. Hence it is very important to ensure correctness of NCB declaration and avail only the actual NCB which one is eligible as per the terms of the motor insurance policy. The policy wordings clearly provide the details of NCB eligibility for each claim free year. Many times,the agent prompts the insured to declare that there was no claim under the expiring policy hoping that it will be never checked. However,the implementation of IIB has helped insurers to check the claim status under previous policies to a very large extent. Hence wrong declarations should not be done at any cost.
Lot of people forget to renew their motor insurance policy on time. It is very important that renewal premium is paid before the expiry of the current policy so that there is a continuous renewal. A gap in renewal may require inspection of the vehicle by the insurers representative to ascertain the existing damages if any and put appropriate conditions in the renewed insurance policy.
In addition to the standard motor insurance cover,there are add-on covers available which offers extended protection
Nil depreciation or Depreciation buy-back,No Claim Bonus protection,Return-to-Invoice,Increased Personal Accident,Accidental Hospitalisation,are some of the popular add-on covers
In India,all insurers offer No Claim Bonus in which the insured will be eligible for 25 per cent No Claim Bonus in the third year if he has not claimed insurance for two years
Author is MD & CEO,Future Generali
India Insurance Co Ltd
KG Krishnamoorthy Rao
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