Motor insurance add-ons that add the most value to your coverage

Motor insurance add-ons that are a must- have in your protection portfolio

Motor insurance is often seen as legality, or at best, a protection against road accidents. However, the scope of motor insurance is much wider. Yet awareness remains low about the kind of comprehensive coverage it offers.

It goes beyond the basic coverage of third-party liability, encompassing damages arising out of not only accidents but also theft, natural disasters, and more. Not just that, comprehensive coverage not only refers to own damage cover but also the option of adding suitable add-ons to address any specific needs.

Let's delve into the significance of these add-ons and how they contribute to enhancing overall coverage.

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This add-on feature offered in motor insurance policies provides round-the-clock support to policyholders in the event of vehicle breakdowns, a flat tyre, engine failure, an empty fuel tank, or any other situation that renders the vehicle immobile. It offers towing services, on-site repairs, emergency fuel and adjustments, and any other assistance to address operational issues.

This add-on covers the policyholder for the cost of the damages to the engine that occur due to engine malfunction, lubricating oil leakage, ingress of water, hydrostatic lock, etc. The engine is the most important and expensive part of a vehicle, and any damage to it can result in significant repair costs.

Even those with their own damage cover may be forced to bear the cost of repairs on their own in the event of engine damage. For vehicle owners living in areas prone to flooding or waterlogging, this is a valuable and essential addition to motor insurance.

Also read: How to file insurance claims for your flood-damaged car

Depreciation occurs due to a gradual reduction in the vehicle's value over time due to factors such as the age of the car and wear and tear. Since all vehicles are subject to depreciation, standard motor insurance coverage determines the total amount payable during a claim by calculating and applying the standard depreciation rate as prescribed by the Insurance Regulatory and Development Authority of India (IRDAI).

However, with a zero-depreciation cover, commonly known as a bumper-to-bumper cover or nil-depreciation cover, the policyholder can get the full value of the vehicle without factoring in depreciation. In fact, due to the absence of deductions, the customer can save significantly on claim costs. For example, in the case of a five-year-old vehicle, insurance companies apply a 50 percent depreciation rate.

Assuming an average claim falls within the range of Rs 30,000-40,000, the insurance company will cover only half of this amount. The remaining Rs 15,000-20,000 will need to be covered by the customers who did not choose to add this coverage at the time of purchasing the policy.

Thus, customers can minimise the financial impact of rapid depreciation. In addition, new drivers or those living in accident-prone areas may also find this coverage beneficial. However, even existing policyholders have lately been opting for this coverage.

While the benefits are significant, it's important to note that zero-depreciation cover usually comes with a higher premium than standard policies. Yet, for many policyholders, this expense is justifiable due to the cost-efficiency it brings during claim settlements, mainly because it negates the depreciation value of the vehicle. It is essential to be aware of certain limitations associated with this cover. Some insurance companies provide zero-depreciation coverage up to specific vehicle ages — ranging from up to five years and up to 10 years for older vehicles.

This add-on feature provides additional protection by covering the expenses incurred on consumable items used during vehicle repairs. This specifically caters to costs related to materials such as nuts, bolts, screws, engine oil, lubricants, and other essential items. While standard motor insurance policies typically cover repairing damaged parts, they may exclude these consumables, leaving policyholders with having to pay for out-of-pocket expenses.

This add-on comes to the policyholder’s rescue if the vehicle is stolen or suffers a total loss. Under a regular comprehensive policy, one is eligible to receive compensation up to the Insured Declared Value (IDV). However, with this add-on, one can get full compensation up to the last invoice amount of the vehicle.

This translates to significant savings as the IDV gets depreciated, and it doesn’t factor in the road tax registration and other costs that are borne by the policyholder at the time of purchase.

In conclusion, opting for add-on features in your motor insurance policy is a strategic decision that significantly enhances the overall value of your coverage. These supplementary features address the specific needs and potential gaps that may arise during unforeseen circumstances.