Subbu’s car is two years old. In the recent rains, the car’s engine was completely damaged. He promptly called the insurer but was shocked to find that the insurer would not pay for replacing the engine. The customer relations manager at the insurer’s office called it a ‘consequential damage’ and said that the contract doesn’t require them to reimburse such losses.
Though all of us have our vehicles insured, we know little about the policy and damages that are covered under the contract.
Riders can help
Motor insurance policies have several exclusions. For instance, damage due to manufacturing defects, mechanical or electrical breakdown or improper handling of the vehicle by the driver is not covered under the policy. Also, loss arising from calculating the value of plastic, rubber parts of the car after deducting depreciation and any ‘consequential loss’ is excluded. Consequential loss is an indirect loss, which is not directly resulting out of an accident, but happening subsequently, says Amitabh Jain, Head- Customer Service, ICICI Lombard. Suppose your car’s engine got damaged as you drove through a waterlogged area, then the insurer is not liable to pay for the charges of repairing or replacing the engine as the loss is not directly related to rains.
Is there a way to cover such indirect risks? Yes, motor insurers offer ‘engine protector’ cover as an add-on to the main policy. This lets policyholders claim even on consequential damage of engine on reasons including water ingression, leakage of oil or damage to the gear box due to any accident. Also, if the risk of your car’s interiors getting spoilt in the rain is high, you can also consider the ‘depreciation cap’ cover. This cover pays full claim on plastic and glass parts of the car that have to be replaced without deducting the depreciation charge. Suppose you have to change a plastic part in your car and say it costs Rs 6,000. Normally, here the insurer will pay only Rs 3,000 as he deducts almost 50 per cent of the actual cost as depreciation. With a depreciation cover, you will get the full amount reimbursed. Bharti AXA, ICICI Prudential and HDFC ERGO are some insurers that offer this cover.
The cost of these add-on covers is not much. With Bajaj Allianz General Insurance, for example, you can get them for 0.7-0.75 per cent of the insured declared value (IDV) for small cars and 1-1.10 per cent of the IDV for high-end cars. The IDV is the showroom price of the car, less depreciation.
Claims
When you are caught in heavy rain or floods, the first thing to do is to inform your insurer and move the car to the nearest garage. Never attempt to start the engine. It is always advisable to tow the vehicle to avoid further damage. With most insurers, you can register the claim even through a call to the call centre. So, have your insurer’s number stored in your mobile. When registering the claim, you will be asked your policy number, the car’s registration number and few other details. Opting for a cashless service may save you of many hassles. All that you need to do here is to take the vehicle to a listed garage (you get cashless service only in the garages that are in your insurer’s network) and fill in the claim form. The estimate of the bill is sent to the insurer directly and he settles it with the workshop without you having to intervene. If you take the re-imbursement option, you will have to pay for the repair from your pocket and then wait to get the reimbursement.
Should you use the no-claim bonus?
No-claim bonus (NCB) is an incentive for the policy holder to drive safe. It is given in the form of a discount against future premium payments. For one year of no claim on the policy, one will get a 20 per cent discount on the premium. This discount rises to 50 per cent when there are no claims for five consecutive years.
But since you will lose your entire bonus as soon as you make your very first claim, you need to think twice before making a claim. As you take the car to the workshop, you will get an estimate of the charges for repair. Check if that amount is more than the savings you will make that year by not claiming on the policy. If not, just go ahead and make the claim. Also, if just one year has expired on the policy, you may not have any accumulated bonus and you can just go and claim on the policy.
As the NCB helps save on the premium, do not forget to have it transferred to you when you sell the vehicle.