One should look at the costs in the light of the benefit these add-ons offer and accordingly purchase them.
Motor insurance is mandatory as per the Motor Vehicles Act. But what is mandatory is the third party (TP) insurance which covers you for damage done by you to a third party in an accident. It does not cover the damage done to your own vehicle, which is covered under own damage (OD) cover. And the second party in an accident is the insurance company. So, even though you will be well within the legal requirement if you take TP insurance, you will need to take an OD cover as well to make your claim procedure hassle-free as TP claims can take months and years and the process is cumbersome.But, to make your policy really wholesome and effective, besides a comprehensive policy, you will also have to take some add-ons or riders at an additional cost because they make life easier with help such as 24x7 roadside-assistance. Since there is a long list of add-ons available, here we will list some of these in an order of priority so that you can choose what is necessary for:
1. Zero depreciation
One important thing to know is that in a comprehensive policy, damage to certain parts of the vehicle is not covered completely. The Insurance Regulatory and Development Authority of India (IRDAI) has fixed depreciation rates for different motor parts, and insurers pay only the damage parts depreciated value, and the rest of the repair cost needs to be borne by the car owner. The zero depreciation add-on comes into play here as it ensures full insurance payment for the damaged parts. This is why this add-on is at No 1 on our priority list. To help you avoid the burden of depreciation costs, almost every motor insurer is offering a zero depreciation add-on generally at a price of 0.4% to 1.5% of the vehicle’s Insured Declared Value (IDV). Moreover, there is a limit to numbers of claims you can file under this add-on, and this number varies from insurer to insurer. So, it is necessary to ask your insurer to declare how many times claims can be made.
2. Roadside assistance cover
This add-on comes handy when your vehicle breaks down due to malfunctioning of a motor part or a tyre puncture. Under this, your insurer has the option to send a mechanic to the site of your vehicle break-down, and in case of a serious problem, get the vehicle towed to a nearby workshop. This add-on is offered by almost all insurers at a nominal cost of INR 400 to INR 800, depending upon the IDV of your vehicle.
3. Invoice price protection (IPP)
The IDV of even a new vehicle is never equal to the actual price of the vehicle. Insurers generally put 5 % depreciation on a new vehicle. That means if the cost of a new car is INR 10 lakh, and it is stolen within a year, the insurer will give only INR 9.50 lakh. As its name suggests, the IPP add-on protects a vehicle against depreciation and you get the full invoice price of your vehicle which is INR 10 lakh in case of theft or total loss in an accident. The importance of this add-on is clear from the fact that one vehicle gets stolen every 13 minutes in Indian metro cities. However, this add-on is offered by only a few insurers and can be availed only if a vehicle is not more than 3 to 5 years old which varies from insurer to insurer.
4. Consumables cover
Items such as engine oil, coolant, brake fluids, nuts & bolts, are known as consumables and are not covered even under the zero-depreciation insurance policy. In an accident, the replacement cost of such items may add up to INR 5000. But if you have consumables cover, the cost of such items will also be paid by your insurer. The premium of this add-on varies from INR 200 to INR 800 depending on the IDV of your vehicle.
5. Engine protection cover
Engine protection cover is important for people who live in a city which receives heavy rains and where roads get logged with water very often. In such places often car engines are damaged due to water ingression and for you, this add-on should rank on number 2. The reason behind this is that such engine damage is not covered under a standard motor insurance policy and you need to buy the engine protection add-on to have this risk covered in your policy. The cost for this add-on varies from city to city and depends on the IDV of your vehicle. It is generally 0.15% to 0.20% of the IDV.
6. NCB protection
No Claim Bonus (NCB) is a discount given at the time of policy renewal in cases where no insurance claim was made throughout the year. This discount is given on the `own-damage’ premium component of a policy and it can go up to 50% if no claim is made for five consecutive years. But if you have bought NCB Protection add-on, then you will be entitled to NCB even if you have staked insurance claim. Almost all insurers give this add-on at a cost of INR 800 to INR 1000. Moreover, this benefit is only available if you continue with the same insurance company and not moving to a new insurer at the time of renewal.
7. Personal accident cover
Insurance is all about protecting oneself against any risks that one can run into while driving on congested roads full of haphazard traffic which took a toll of 400 lives everyday last year. It is, therefore, imperative for all vehicle owners to buy a personal accident cover add-on with a motor insurance policy. This add-on entitles you to get paid for the medical expenses that you may have to incur due to an accident. In case of death or disability, the add-on ensures payment of the predefined sum assured. You are bound by the Workmen Compensation Act 1923 to insure your driver as well. So, you will have to take a separate add-on for your driver. The premium for these add-ons is fixed - INR 200 for a 2 lakh cover for you and INR 50 for your driver. The compensation for driver’s accident, however, is only for disability or death and the same will be determined as per the provisions of the Workmen Compensation Act 1923.
8. Lock and key replacement
This add-on gives cover against loss of vehicle keys and lock. This cover may not be needed for mid-segment cars as the lock and key replacement cost for these cars may not be much. But for semi-luxury and luxury segment cars, lock and key replacement can burn a hole in your pocket. Some insurers give this add-on as part of a comprehensive policy but even if it needs to be bought separately, it does not cost much.
To Sum up
So, as we saw, there are a number of add-ons available in the market. One should study features of each one of these, and taking into account specific needs and location, can choose the ones that are necessary to get enhanced protection.
(The writer is Director, Policybazaar.com)