When you drive on the road, there is always a chance that you might get into an accident. In such a situation, car insurance is an urgent financial need of every car owner. It ensures the policyholder and their vehicle in the event of an accident against any damages. However, to get all the benefits that insurance offers for a vehicle, it is important to know about the terms and conditions attached to the policy.
Since car insurance is a contract, being aware of the terms and conditions of the policy is essentially a measure of safety against any possible confusion at the time of claim. Inexperienced policyholders often feel lost in insurance terminology. However, if you are seeking insurance for your vehicle online, you should do the research before you pay for the car insurance policy.
While it is widely believed otherwise, car insurance terminologies are straightforward. Hence, once you understand them, making an informed decision is easy. To eliminate ambiguity regarding the terms and conditions attached to vehicle insurance, here are a few popular terminologies used in car insurance:
- First party, second party and third party in car insurance
In a car insurance contract, the first party refers to the policyholder. The second party is the insurance company. The insurance policy is the contract between the first and second parties. In the event of an accident, any person affected other than the first party is known as the third-party.
Hence, if you buy car insurance, you would be the first party, and the insurance company would be the second party. If your car accidentally hits a pedestrian and injures them, that person becomes a third party and will be liable to receive compensation for their injury and any other property damage under your third-party coverage. *
- Insured declared value (IDV) and sum assured
IDV refers to the sum assured of the policy. It is the maximum amount of money your insurance company will pay in the event of your vehicle being stolen or total loss. IDV is calculated by adjusting the manufacturer’s selling price of the car for depreciation according to vehicle age. *
- Add-ons or riders
Insurance riders enhance the basic insurance policy and add an additional layer of protection. Riders come with an additional premium price. Moreover, add-ons are only available with comprehensive car insurance. Hence, if you are buying third party car insurance online, you will not have access to add-ons. *
- Claim settlement ratio
The Claim Settlement Ratio is a metric used to measure the percentage of insurance claims settled by an insurance provider in a financial year. It is calculated by considering the number of claims received by the insurance company during this period as well as the pending claims in the previous year. The Claim Settlement Ratio is an important factor to consider when purchasing insurance for your vehicle online. It is essentially a measure of how effective an insurance company is in settling claims. *
* Standard T&C Apply
Knowing something is half the battle won. Hence, if you know the terminologies related to car insurance, buying, and managing the policy becomes much easier. You would have more control over the purchase of the policy regarding the coverage you should buy. After you have bought the policy, having detailed knowledge about car insurance would help during claims and insurance renewal. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.