What Insurance Companies do not tell you about your Vehicle's Insurance?

Knowing about the Vehicle Insurance Policy

“Buyer beware” is a common caveat which is used to warn buyers of services like insurance covers. In the context of vehicle insurance this is all the more relevant. Failing to read and understand the exclusions mentioned in the insurance policy documents can result in a feeling that the insured has been taken for a ride, literally and figuratively.

The insurance companies calculate the premium for the vehicle insured, based on its assessed value which is revised each year by deducting a certain

amount as depreciation from the base value of the previous year. If a car meets an accident during the fifth year of its purchase, the amount of compensation received will be much less than the amount the insured might have received in case of the accident having occurred in the second year of purchase. This is primarily because the components have diminished in value due to depreciation.

Exclusions to the Vehicle Insurance Cover

Here is a list of instances where exclusions are made by insurance companies while settling claims for vehicles:

The driver of the vehicle is found without a valid driving license after an accident .
When the driver of the vehicle is found to be under the influence of alcohol.
When the vehicle is being driven outside the geographical boundaries of India.
When there is normal wear and tear to the vehicle due to the natural pro
When any major breakdown- mechanical or electrical, occurs.
When the vehicle is used for any purpose other than intended, especially if it is illegal in nature.
If the tyre and/or tube of the vehicle is found to be damaged before the accident having occurred. Damages after the accident are however covered.
If the owner or insurer of the vehicle willfully causes damage and seeks compensation towards such damage.
If the damage to the vehicle is caused by acts of terror, war, mutiny or nuclear risk
Where there is consequential damage due to depreciation. The following table will provide a fair idea as to how much the factor of depreciation can reduce the claim amount:

Item	Level of Depreciation	Depreciation rate applied
Rubber; Plastic parts; tyres/tubes; Battery, etc.	High	50%
Fiber Glass parts	Moderate	30%
Metallic parts	Age dependent	0% up to 6 months
	-Moderate to high	Up to 50% after 10 years
Painting	High	Up to 50% of material cost

Recourse to vehicle insurance cover exclusions for depreciation

Anyone going in for vehicle insurance can always avail of the add-on cover to a standard vehicle insurance policy offered by insurance companies. This add-on is called “Zero Depreciation” clause. This usually comes at a cost which is around 20 % to 30 % higher than the normal premium rate.

Even this add-on cover has its own set of exclusions and they are as follows:

Only vehicles up to the age of 5 years are usually eligible for this cover.
Normal wear and tear due to aging is not covered.
The normal mechanical breakdown is also inadmissible for the claim.

It is thus obvious that small cars would not gain much by taking such a cover. However, bigger vehicles whose spares and parts are more expensive, can derive some benefit from this add-on cover.

To claim or not to claim from your vehicle Insurance

As a thumb rule it is always advisable to make careful assessment before lodging a claim for damages to a vehicle. This is necessary because insurance companies offer a ‘no claims bonus’ as an incentive to customers who have not made a claim and this can go up to 50 % of the last premium paid. Thus, if the damage is of minor nature it would be better to refrain from making a claim and losing the ‘no claims bonus’ at the time of renewal. Financially speaking the discount for ‘no claim’ could be higher than the amount of compensation claimed now for the minor damage and hence it is not advisable.

Final Decision on vehicle Insurance

The final decision certainly rests with the insurer who has to decide on the policy cover and add-ons, based on the particular driving needs and the amount of money he is willing to spend.

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