A car insurance policy is a mandatory cover for driving the car on Indian roads, all thanks to the rules prescribed in the Motor Vehicles Act, 1988. The Act states that every car, running on Indian roads, should have a valid third party liability policy. This policy would cover the damages which the car causes to any other individual apart from the car owner.
However, a third party policy does not cover damages which the car suffers. So, if the car is damaged and needs repairs, the policy wouldn’t pay for such repairs. In light of this restricted cover, a comprehensive car insurance policy is recommended which covers not only third-party liability but the damages suffered by the car itself through natural or man-made causes. The plan, therefore, provides an all-round coverage benefit for the car. But, is the coverage all-inclusive?
No, it is not. There are exclusions in car insurance policies, both third party and comprehensive plans, which policyholders should know about. Some of the most common exclusions which are found in all car insurance policies include the following –
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Normal wear and tear
As the car is used, the parts of the car suffer normal wear and tear. This damage is routine and normal and is not covered by the car insurance plan.
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Depreciation
Similar to wear and tear is the depreciation in the value of the car and its parts due to age and usage. Such depreciation is also not covered. The depreciation in the value of the car is reflected in the Insured Declared Value (IDV) which reduces every year. In case of depreciation on the car’s parts, the depreciation is calculated in case of a claim. The depreciation is then deducted from the value of the part repaired or replaced and then the claim is paid.
To protect against the depreciation suffered by the car’s parts, policyholders can buy the zero depreciation add-on available with comprehensive car insurance policies. This add-on nullifies the effect of depreciation and the full value of the parts is paid in case of a claim.
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Damages suffered in case of specified instances
Damages which are suffered by the car in the following instances are not covered –
o If the car is being driven outside the geographical territory of India
o If the car is being driven under the influence of alcohol, drugs or both
o If the car is being used for any criminal activity
o If the car is being driven by an individual who does not have a valid driving license
o If the car is being used in racing or any other adventurous or hazardous sports activities
If a claim is made for any contingency suffered due to any of the reasons above, the claim would be rejected.
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In case of war or war-related situations
If there is a war, mutiny, rebellion, civil unrest, nuclear contamination or threat, etc., the damages which the car would suffer would not be covered under the car insurance plan.
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Violation of limitations of using the car
There are limitations to using a car. For instance, a private car is not supposed to be used for commercial activities or for carrying goods. If, however, the car is used in violation of these limitations, the consequent damages would not be covered by the policy.
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Other exclusions
Other damages which are not covered under a car insurance policy include the following –
o Consequential losses
o Damage to the engine in case of water seepage (unless covered under an engine protect add-on)
o Electrical or mechanical breakdowns
o Cost of consumables used in repairs (unless covered under the consumables cover add-on)
o Damage to the car’s tires without an accident taking place
Knowledge of these exclusions is a must to know which claims would not be entertained by the insurance company so that the policyholder can avoid making such claims. Most of your clients might not know about these exclusions and so it is your job to educate them. Tell them what their car insurance policy would and would not cover. Moreover, suggest them to invest in add-ons since there are some add-ons which give coverage against certain exclusions (depreciation of car’s parts, consumables, engine, etc.). With these add-ons, the policy can be made more comprehensive and inclusive giving their cars an all-around coverage.