Common Car Insurance Terminologies You Should Know!
Published On Mar 28, 2021 11:00 AM By InsuranceDekho
Learn about the most common car insurance glossary terms before purchasing a car insurance plan.
Table of Contents
Most car owners choose a car insurance policy based on its coverage and premium but do not understand its terms and conditions due to a lack of awareness about specific terms mentioned in the car insurance policy document. This eventually creates a hindrance in using the policy. Therefore, it is recommended to get an overview of the most common car insurance glossary terms before purchasing a car insurance plan. Let us dig into some of the most popular terms associated with car insurance to make a well-informed choice.
LIST OF COMMON TERMS
The list of common terms includes:
- Insurance Policy - A formal agreement or contract stating the coverage, premiums, and terms of a car insurance plan.
- Premium - The cost to be paid by insured persons to the insurance company to get insured under the policy.
- Bodily Injury - Any kind of injury, disease or cause of death which is caused due to a car accident.
- Insured - Insured refers to an individual who is insured under a car insurance policy.
- Insurer - The insurance company which offers insurance coverage upon the payment of premiums.
- Coverage - The coverage denotes the features and benefits offered by a car insurance policy.
- Limit - It is the maximum amount of insurance or protection which the insurance company promises to offer.
- Deductible - It is the cost of repair or expense which the insured person has to pay during the claim settlement before the insurance company pays up.
- Depreciation – Depreciation is the reduction in the value of the insured car due to ageing and wear and tear. It increases with the age of the car that reduces the claim amount offered by the insurer.
- Claim - If your insured car gets damaged or lost due to an accident or a mishap, an insured person can raise a claim. The claim is the amount that you ask your insurer to pay to compensate for your loss.
- Insured Declared Value (IDV) – The IDV is the current market value of the insured car, which generally reduces with its age. It is the value that the insured and insurer agreed upon to be paid on theft or total loss of the car.
- No Claim Bonus (NCB) - NCB is a reward that is offered by insurance companies to its policyholders for not making any claim in a policy year. It accumulates with every claim-free year and ranges between 20% and 50%.
- Third Party Policy (TP) – The third party car insurance policy is the basic insurance plan which is compulsorily required to be carried by car owners while driving. It covers your financial liability towards a third party for their bodily injuries, death and property damage.
- Own-Damage Policy (OD) – The own-damage car insurance policy is the one that covers the expenses arising due to the damages suffered by the insured car due to an accident, theft, fire, natural or man-made disaster.
- Comprehensive Policy - A comprehensive car insurance policy is an all-inclusive cover that shields the insured car and car owner from third party liabilities as well as own-damages.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.