Car Insurance Glossary

Car Insurance Glossary: Definitions and Terminologies Explained

No confusion, just clarity. Explore the expert-built car insurance guide to simplify your protection and claim journey. 

Headline: A-Z Breakdown of Car Insurance Terms

Remember when you bought your first dream car? You picked the perfect model, the colour you always wanted, and felt the rush to own it. However, the biggest question that you came across is which insurance policy is the right fit for my car.  

When you’re handed down the policy documents, everything seems unfamiliar, because there is a flood of terms without any real-world explanations or contextual clarity. Some technical jargon might look intimidating and leave you second-guessing. 

That’s why we’ve created this easy-to-use glossary that simplifies every term and concept you’ll encounter while insuring your car. Zurich Kotak General Insurance puts you firmly into the driver's seat by decoding the car insurance terminologies. So, take a few minutes to scroll through and move forward with confident insurance decisions. 

A

Accessory

In simple terms, they are additional items installed in your car. Your car insurance can cover both electrical accessories and non-electrical ones to the extent specified in your policy, depending upon your accessories. One of the pro tips is to check them accurately to ensure you're not underinsured. 

Actuary

An actuary is a highly specialised person who uses a combination of advanced mathematics, statistics, and financial modelling to calculate the premium you pay. Actuaries are the ones who ensure your policy is priced fairly. Think of them as the silent experts behind your policy’s fine print. 

Add-On Cover

A standard policy gives you base protection, but add-on covers allow you to customise your policy to your lifestyle. These are a range of powerful upgrades that can hike up your premium amount such as depreciation cover, road assistance, engine protect, and much more. The more add-ons you choose, the greater your protection you get.

Anti-Theft Device

Installing an ARAI (Automotive Research Association of India) certified anti-theft device can qualify you for premium discounts under the Zurich Kotak General Insurance policy. Majorly because it lowers the risk of vehicle theft. So yes, something as simple as a steering lock or GPS tracker can be both a security upgrade and a smart financial move. 

B 

Breakdown Assistance

Roadside emergencies can strike anywhere. Breakdown assistance is an add-on cover that will help you reach quick support without panic or extra cost. Whether it’s towing, flat tyre repair, battery jump-start, or fuel refill, you’ll encounter zero disruptions in your journey. 

Break-in Insurance

If your previous insurance has lapsed and you’re applying after a gap, it’s considered a break-in policy. Insurers typically send a surveyor to inspect the vehicle before coverage resumes. It’s a way to restart your policy after a considerable break in a much more transparent and responsible manner. 

Bumper-to-Bumper Cover

This is the kind of cover that gives you near-complete peace of mind. Bumper to bumper cover can help you minimize the depreciation impact of car parts like plastic, rubber, and metal. It’s especially valuable for new or high-end cars. Your car can be restored to its pre-damage condition, without you paying a major part cost.

C 

Car Insurance Starting Price ₹2094

Zurich Kotak General Insurance offers car insurance policies starting from just ₹2094. This base price gives you essential coverage, and from there, you can build a more comprehensive plan with add-ons tailored to your needs. The pricing is transparent as well as competitive. 

Cashless Garage

A cashless garage is part of the insurer’s approved network where your car is repaired without you paying upfront for covered damages. Major repair costs are directly settled with the garage, reducing your financial and logistical stress. It’s clearly convenient during emergency situations. 

Claim

In the context of insurance, a claim is your formal request to the insurer to cover losses under your car insurance policy. It could be for minor damage, a major accident, or theft. You can file a claim more easily now with digital means such as a mobile app, website, or call support from your respective insurer. 

Claim Settlement

As the name suggests, it’s the entire process of validating, approving, and paying your claim. This can be in the form of direct settlement or even reimbursement. Once your claim settlement is done, you can make the crucial payments knowing what’s covered and what’s not. 

Claim Settlement Ratio

This is the percentage of claims settled by an insurer versus the total claims received. Of course, a higher ratio reflects reliability and trustworthiness. 

Comprehensive Coverage

 This is the all-in-one protection plan that covers damage to your vehicle, third-party liability, natural disasters, theft, and more. It’s ideal for anyone who doesn’t want to leave anything to chance. It shields you from the financial aftermath of the unexpected, no matter what happens to your car. 

Compulsory Deductible

It’s a non-negotiable amount you’ll have to pay out of pocket before your insurer steps in to cover the rest of your claim. Think of it as a threshold. It’s built into every car policy and applies automatically at the time of settlement. A higher deductible can usually result in a lower premium. 

Consequential Damage

Sometimes, one problem can lead to another like a chain reaction. Consequential damage is more like a follow-up trouble caused by the original incident. These aren’t always covered by default in your policy. That’s why it’s worth giving your policy a closer look to see where it stands in these situations.

Consumable Cover

When your car goes for repairs, it’s not just big-ticket parts that cost you, it’s also the smaller ones. Consumable covers are designed to protect you against the loss of small, often overlooked components in your car. You can choose this as an add-on to ensure that nothing is missed out on your policy.  

Contributory Negligence

 Sometimes, an accident isn’t black and white. If both parties involved in an incident had a role to play, however small, the principle of contributory negligence applies. Your car insurance can reduce your claim settlement based on the degree of fault during such unfortunate events. 

Coverage

Coverage is the whole foundation of an insurance policy. It’s an umbrella under which different risks are covered. The more coverage, the more protection, but also the higher the premium. Eventually, you need to find a balance because choosing the right coverage for your car is where it all begins.

 D 

Damage/Loss

 These are two similar words but often carry different meanings. Damage is basically physical harm to your vehicle, something that is visible or fixable. Loses on the other hand are when your car is completely destroyed or stolen. Keeping this in mind will make sure there’s no ambiguity if and when you raise a claim. 

Deductible

A deductible is the amount you must pay out of your pocket before the insurance claim kicks in. The deductible can be chosen at the time of buying or renewing a policy, and it directly affects your premium. You are given the option to adjust your deductible if long-term premium savings are needed.

Depreciation

Depreciation is the reduced car’s value over time due to wear and tear. It affects the claim you receive, especially when the damage involves parts like body panels or engine components. That said, there are ways to override depreciation with certain add-ons, especially if you want full protection.

 E 

Effective Date

The date marks the official day when your car insurance begins, and your coverage becomes active. If you don’t renew or purchase a policy by this date, you may find yourself without coverage, even if you’ve already paid your premium. It’s crucial on your part to remember the date for timely renewals.

Endorsement

Insurance policies aren’t rigid, they surely evolve. An endorsement is a formal update to your policy. Endorsements can also adjust coverage limits or correct errors in your policy. A flexible endorsement process ensures the policy is relevant and up to date, reflecting real-life changes you may face.

Engine Protect Cover

The engine protect cover is an optional add-on designed to protect your engine and gearbox from damage. Some car components are often expensive to repair, and typical car insurance policies don’t cover them. However, this additional cover will ensure vital parts are accounted for. 

Exclusion

Insurance policy also has some boundaries. An exclusion is an item, event, or scenario that is not covered by your policy. A transparent policy structure clearly defines exclusions. Being well aware of your car insurance limits will give you clarity on what’s covered and how to stay on well with them.

Extended Coverage

Extended coverage allows you to expand your policy’s protection beyond the basics. It’s a custom-fit layer of protection such as coverage for windscreens, natural disasters, or any personal accident cover. You can easily build a policy that fits both your driving habits specifically and lifestyle.

F

First Notification of Loss (FNOL)

This needs to be your initial step when you need to file a claim. It’s simply the moment when you inform your insurer about the incident. Zurich Kotak General Insurance has made it easy with a simple online process. It simply sets the pace of how fast your claim moves forward.

G

Grace Period

The grace period is the window of time given after your policy’s expiration date to renew without losing coverage. It can be around a 7 to 15-day grace period purely depending on the policy. However, it’s always better to renew your policy before it expires, as claims made during the grace period might not be eligible.

I

Incurred Claims Ratio

This is a percentage that tells you how much of the premium an insurer collects is actually used to pay claims. It’s calculated as: Claims Paid ÷ Premiums Collected × 100. A balanced ICR (usually between 50%–80%) shows that the insurer is both settling claims fairly and managing risk prudently. Too high could indicate unsustainable claim loads; too low might hint at conservative payouts. Either way, it’s a metric worth checking before choosing a provider.

Insured

The insured is the person who owns the policy and is solely entitled to its benefits. So, if your name is on the policy, you're the one protected, the one responsible, and the one who’ll receive the compensation. It may sound basic, but still very crucial because every benefit begins and ends with this identity.

Insured’s Declared Value (IDV)

IDV is the current market value of your car, and it’s the maximum amount you’ll receive if your vehicle is stolen or beyond any repair. It’s calculated by taking into account your car’s depreciation. Too low an IDV means less compensation; too high and you overpay premiums. A smart IDV is one that reflects your car’s realistic worth.

Insurer

The insurer is the company that underwrites and hands over the insurance policy. They take on the financial risks for the premium you pay and settle claims when needed. While they work behind the scenes, their performance directly affects your experience during emergencies.

L

Lapse

A lapse happens when your car insurance policy isn’t renewed before it expires. It may sound non-serious at first, but your coverage stops instantly. This means no coverage, no claim, and No Claim Bonus resets. Plus, if you are caught driving without valid insurance, you may face penalties under traffic laws. Hence, renewing after a huge lapse is necessary to avoid higher premiums.

Legal Liability

Legal liability arises when you’re held responsible for injuring someone or damaging their property. Particularly for car insurance, it refers to third-party liabilities. This form of coverage is compulsory under Indian law as it safeguards you from court cases or financial claims that could otherwise escalate very quickly.

Letter of Experience

A Letter of Experience is like a reference letter but for car insurance. This official document issued by your previous insurer covers details of your claims history and policy tenure. It helps when you’re switching insurance, transferring your No Claim Bonus (NCB), or even when you’re moving abroad and need to show a track record as a responsible driver. 

Liability Coverage

Liability coverage is what protects you from the financial fallout of harming another person or damaging their property with your vehicle. It's the part of your policy that responds when you’re at fault. In India, third-party coverage is mandatory, but if you want broader protection, comprehensive policies often let you add extra layers of liability cover.

Limit

A limit in insurance is the maximum amount an insurer will pay under a specific coverage. For example, your liability coverage might have a cap, or an add-on like personal accident cover may have an upper limit. These limits define the scope of your financial protection. If damages exceed the limit, the rest comes out of your pocket.

M

Motor Vehicles Act

The Motor Vehicles Act is the main legal framework governing all aspects of vehicle registration such as licencing, traffic rules, and importantly insurance requirements in India. It gives a foundation for your car insurance policy, ensuring accountability and safety on the roads are taken seriously.

MVR (Motor Vehicle Record)

Your Motor Vehicle Record (MVR) is like a credit score but for driving. It includes a brief summary of your driving history, licence status, traffic violations, and accidents. It is not commonly reviewed for private car insurance in India. That being said, a clean MVR can reflect well on your insurability and policy pricing.

N

Natural Calamities

There are some events you can't predict or have control over. These include floods, earthquakes, cyclones, storms, or any other severe damage to your vehicle. Such calamities are usually covered under comprehensive insurance, not under a basic third-party policy. It's always a wise decision to ensure your policy protects you against such nature-led events.

Network Garages

Network garages are tied up with the insurer to give you cashless repair options. When your vehicle is damaged, you can get it repaired at a network garage, and the insurer will pay the bill directly. Zurich Kotak General Insurance has 4400+ cashless garages that will ultimately save you time and effort.  

No Claim Bonus (NCB)

No Claim Bonus is a reward for driving responsibly. If you go a policy year without filing any claims, you earn a discount on your premium during renewal. The NCB starts at 20% and can go up to 50% over five consecutive claim-free years. It’s considered one of the most valuable long-term benefits in car insurance, as it literally rewards safer driving habits.

O

Own Damage (OD) Cover

It is financial protection if your own vehicle is damaged due to accidents, collisions, natural disasters, or even theft. While third-party liability insurance does cover others’ damages, Own Damage cover takes care of repairs or replacement for your own car. Though optional, it’s highly recommended, as the cost of repairs can easily exceed the price of your policy.

  P

Passenger

A passenger is anyone riding in the vehicle besides the driver, whether it's a family member, a colleague, or a friend. While the most basic policies focus on damage to the car and third party, passenger safety is also needed. It’s important to check whether your insurance policy takes in account the medical expenses, hospital stays, or even death benefits for those riding with you.

Passenger Cover

This cover simply provides financial protection to passengers riding along with you in your car. This happens in the case of injury or death caused by an accident. To tell in essence, this cover offers hospitlisation expenses, medical costs, or even compensation for the family if a tragic incident occurs. It is good to double-check if passengers are covered in your comprehensive car insurance policy.

Personal Accident Cover

Personal accident cover happens if the policyholder is involved in an accident resulting in death, permanent disability, or serious injury. It is specifically designed to handle the direct consequences of accidents. While the policyholder is often the primary beneficiary, if passenger inclusion in the cover it gives a broader safety net for those who ride along with you.

Policy

It is more than just a document; it’s a formal agreement between you and your insurers. It gives a brief detail about the terms and conditions of your car insurance. It outlines what’s covered, what’s excluded, the premium amount, and lastly, the deductible you must pay in the event of a claim. Every policy is unique to the insurance provider. However, the key is to understand the rights and obligations to ensure they align with yours.

Policy Document

Your policy document is the official record of your car insurance agreement. It is generally issued by the insurance company that lays out all the details of your chosen plan.  The document can act as your go-to reference for all terms, conditions, exclusions, and endorsements. You will need it for reviewing the cover, verifying details, or even understanding the claim process. So, keep it safe and always refer back to it for clarity.

Policy Period

The policy period is defined as the duration your car insurance is active, typically one year but sometimes more. Once the term is over, you need to renew your car policy to continue the coverage. The policy period determines how long you’re protected as per the terms outlined in your agreements. So, it’s crucial enough to take note of the dates and ensure there’s no lapse in coverage. 

Policyholder

The policyholder is an individual or an entity who purchases and owns the insurance policy. As the policyholder, you’re responsible for paying the premium, adhering to the terms, and making claims in case of an event. If the policyholder is different from the insured (for example, when a parent buys a policy for their child’s car), the terms of the coverage may differ. Hence, always ensure the policyholder's details are accurate to avoid complications.

Premium

The premium is the amount you pay to the insurer in exchange for your car insurance. It can be paid in diverse ways like monthly, quarterly, or annually. It also varies based on factors like your vehicle’s make and model, driving history, and the level of cover. A low premium might feel lighter on your wallet, but eventually, it compromises on the protection. Finding the right premium is about striking the balance between cost and cover.

Proof of Loss

While you file the claim with your insurer, you will have to submit the proof of loss. This document includes details like photos, repair bills, police reports, medical documents, or anything that can verify the extent of your claim. The more detailed and accurate your proof of loss is, the smoother the claims process will go, ensuring you don’t face delays or complications during settlement.

  Q

Quote

A quote is an estimate by an insurer for your car insurance premium, based on the details you provide. The quote can vary depending on your vehicle type, age, driving history, and the cover options available. When obtaining your car insurance, always ask for multiple quotes to compare prices and coverage details. Remember, the cheapest quote doesn’t always mean the best value, balance cost with the cover you actually need.

R

Renewal

Car insurance renewal is nothing but the continuation of your car insurance policy once the current once has expired. During such a process, the insurer reassesses the amount based on any claims made, inflation, or any changes in coverage needs.  Timely renewal is important to avoid a policy lapse and any gaps. Always review the renewal terms and ensure the no-claim bonus (if applicable) is accounted for.

Repairs

Repairs in the context of car insurance refer to the fixing or restoring of your vehicle to its pre-damage state after an accident, breakdown, or natural disaster. These could be minor fixes (like a dent or scratch) or major repairs (such as engine or transmission work). The scope of repair coverage is determined by the type of policy you hold. While comprehensive insurance typically covers repairs (after deductibles), third-party insurance only provides coverage for damages to another party’s property or vehicle, excluding your own.

Replacement Cost

Replacement cost is a critical aspect of your car insurance that ensures you are reimbursed for the actual cost of replacing your vehicle or its components with new equivalents, when there’s total loss or irreparable damage. Unlike the depreciated value, which factors in the car’s age and condition, replacement cost ensures you are not left with a payout that falls short of replacing your car with its original value.

Return to Invoice Cover

Return to Invoice Cover (RTI) bridges the gap between your car’s insured declared value (IDV) and the original invoice price. If your vehicle is stolen or declared a total loss, the policy offers a payout based on the Insured Declared Value (IDV). Return to Invoice ensures that you get back the full invoice price, including registration and road tax in some cases. 

Risk

Risk is the probability of an event occurring that results in loss or damage. Everything from where you live, how you drive, and the age of your vehicle, to how often you’re on the road contributes to your risk profile. Insurers calculate premiums by assessing this risk. It’s as simple as a higher risk is equal to a higher premium. Comprehending your personal and vehicle-related risks helps you make smarter choices and possibly even reduce your premium.

Roadside Assist Cover

Roadside Assist Cover (RSA) offers emergency support if your vehicle breaks down mid-journey, whether it’s a dead battery, flat tyre, engine trouble, or you’ve simply run out of fuel. Instead of calling a local mechanic or tow lorry and paying out of pocket, this cover connects you with on-the-spot help or towing to the nearest garage. It’s especially valuable for long-distance drivers, frequent travellers, or those who want peace of mind every time they start the engine.

S

Surcharge

A surcharge is like a red flag in your insurance history. It’s an essential an extra fee to your insurance premium due to specific risk factors. This could be the result of traffic violations, accidents, late renewals, or even owing to high-performance vehicles. Basically, a penalty fee for behaviour or conditions that can increase the likelihood of a claim. These charges are avoidable with safe driving habits and maintaining a clean record.

T

Third-Party

The third party insurance refers to any individual or property that is affected by your vehicle, apart from you (the first party) and your insurer (the second party). For example, if you have accidentally damaged another person's car, they are considered as third party in your claim. This concept of third-party liability is legally mandatory under Indian law.

Third-Party Coverage

Third party coverage is the minimum legal requirement made for car insurance in India and mandated by the Motor Vehicles Act. The main focus is to protect you from financial liability like bodily damage, injury, death, or property damage done to someone else while driving. However, it does not cover damage to your own vehicle. While it keeps you compliant and offers basic level protection, it’s best when paired with add-on covers.

Total Loss

A car is declared a total loss when it is either damaged beyond repair or the cost of repairs exceeds a significant portion of the vehicle’s insured value, mostly 75% or more of its IDV. In such cases, the insurer settles the claim by paying out the IDV, instead of attempting repairs. This classification is common in severe accidents, fires, or theft cases where the vehicle cannot be recovered.

Traffic Violation

A traffic violation is any breach of road safety laws, from speeding, running red lights, or drunk driving, to not wearing seatbelts. These violations don’t just invite penalties from authorities they also affect your insurance risk profile. Frequent violations can lead to surcharges, claim rejections, or even policy cancellations. Insurers now monitor driving behaviour more closely than ever.

Tyre Protect Cover

Tyre protect cover is an add-on that covers the cost of repairing or replacing damaged tyres and rims, including sidewall damage or cuts. These are not typically included in a standard insurance policy. Given how common and costly tyre issues can be this cover helps avoid out-of-pocket expenses. It’s particularly helpful for those driving in poor road conditions or on highways.

U

Underinsured/Uninsured Motorist Coverage

This cover is bought into the picture when an accident is caused by someone else who either has no insurance or insufficient insurance to cover your damage. In such scenarios, the best thing that happens is your own insurer steps in to pay for your medical bills or vehicle damage. While it’s not mandatory in India yet, the concept has gained much attention. It acts as a safeguard against someone else’s lack of preparedness.

Underwriter

An underwriter is considered as an expert behind the scenes. The one who can evaluate the risk associated with insuring your car. Based on various data points available like driving history, location, type of car, and claims history they determine whether to approve the policy and at what premium. They play a bigger role in maintaining the insurer’s financial health, while also keeping in mind that policy aligns with your risk profile.

V

Voluntary Deductible

A voluntary deductible is the amount you agree to pay from your own finances, whenever there’s a claim. This is paid in addition to the compulsory deductible. When you choose a higher voluntary deductible, it means you bear a larger share of the claim cost. It’s an ideal choice for confident drivers with a low risk of claims and who want to lower their premium by sharing some of the financial responsibility.

  Z

Zero Depreciation Cover

Zero Depreciation Cover is one of the most valuable add-ons for new or high-end cars. Normally, insurers deduct the depreciated value of parts (especially plastic, rubber, and metal components) when settling a claim. With this cover, you receive the full cost of repairs or replacements without much deduction for depreciation.