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Fine prints in a car insurance policy

Given that very few people read the thick document that comes attached with a typical car insurance policy, here is a summary of the salient clauses in the same.

Risks covered
The car is insured against loss or damage due to fire, explosion, lightning,
self ignition, theft, burglary, riots, strike, floods, earthquake, accidents, malicious act, terrorism, landslide and while in transit. 

You will not be reimbursed the actual cost of repairs. Depreciation, as per the rates given below, is applied while calculating the claim amount.
- Rubber/Plastic parts, tyres, tubes, batteries, air bags : 50%
- Fibre glass components : 30%
- Parts made of glass : Nil
- All other parts : Rate of depreciation progressively increases from Nil in the first six months to 50% when the age of vehicle exceeds 10 years.

You can avoid such deduction by opting for the zero depreciation cover.

In addition, reasonable towing and redelivery charges are borne by the insurance company.

Losses not payable
- Normal wear and tear, mechanical or electrical breakdown, depreciation, consequential loss
- Damage to tyres and tubes (unless it is due to the aforesaid risks)
- Vehicle being driven under the influence of liquor or drugs

Sum Insured

Termed as IDV or Insured's Declared Value, this amount is decided on the basis of the age of the vehicle. It progressively reduces from 95% of the listed sale price of the car for age up to 6 months and going down to 50% of the listed price for age between 4 to 5 years. Thereafter, the IDV is fixed based on the mutual understanding between the insurer and the insured.

IDV is paid in case of Total Loss / Constructive Total Loss (this is the case when the cost of repair exceeds 75% of the IDV). 

Personal Accident
The owner-driver is paid a compensation for bodily injury or death which is 100% of the personal accident cover for death; permanent total disablement; loss of two limbs; loss of sight in both eyes; or loss of one limb and sight in one eye. 50% of the cover is payable for loss of one limb or sight in one eye.

Third party damage
The insured is also indemnified, up to the specified amount, for the death or bodily injury caused to any person or damage to any property due to an accident arising out of the use of the vehicle.

Transfer of ownership

The policy can be cancelled upon transfer of ownership. However, for the same, it is necessary to produce evidence that the vehicle is insured elsewhere. 

Policy after death of the insured
Unlike many insurance policies, this policy does not lapse immediately upon the death of the insured. Instead, the policy continues and remains valid for a period of 3 months. The idea being to give time to the legal heir, who becomes the new owner of the vehicle, to either transfer the insurance policy in his name or buy a new policy.

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