Types of car insurance policy
Type of Insurance | Coverage | Mandatory/Optional | Key Features | Best For |
Third-Party Car Insurance | Covers legal and financial liabilities towards third parties for injuries, death, or property damage. | Mandatory as per Indian law. | It protects against third-party liabilities but does not cover your own vehicle. | Meeting legal requirements at an affordable cost. |
Stand-Alone Own Damage Car Insurance | Covers damages to your own vehicle due to accidents, natural calamities, man-made events, theft, or fire. | Optional but recommended for financial security. | Focuses solely on damages or losses to your own car. | Car owners who already have third-party insurance but need protection for their own vehicle. |
Comprehensive Car Insurance | Combines third-party liability coverage and own damage cover, offering all-around protection. | Optional but provides complete protection. | Covers third-party liabilities and damages to your vehicle in one policy. | Car owners are seeking comprehensive coverage for their car and third-party liabilities. |
What is the Insured Declared Value (IDV) in OD car insurance?
Purpose
IDV determines the sum insured under your OD policy. It directly impacts your premium—higher IDV means a higher premium and vice versa.
Calculation
IDV is calculated based on the car's ex-showroom price minus depreciation. Electrical and non electrical accessories not included in the vehicle IDV..
Depreciation rates for IDV calculation are predefined by the Insurance Regulatory and Development Authority of India (IRDAI).
Coverage for Total Loss
In case of vehicle theft or total damage, the insurer compensates you with the IDV amount after deducting deductibles and depreciation.
Customizable IDV
Some insurers allow minor adjustments to the IDV. While a higher IDV means better coverage, it also increases the premium. Conversely, under-declaring your IDV may reduce premiums but leave you underinsured.
Exclusions
Regular wear and tear or partial damages to the vehicle are not paid based on IDV.
How to calculate premium of own damage insurance?
The premium for Standalone Own Damage insurance is calculated based on multiple factors, including the car's Insured Declared Value (IDV), age, location, and applicable discounts or loadings.
Formula for Own Damage Premium:
OD Premium=(IDV×OD Rate)/100+(Loading - Discounts)\text{OD Premium} = (\text{IDV} \times \text{OD Rate}) / 100 + \text{(Loading - Discounts)}OD Premium=(IDV×OD Rate)/100+(Loading - Discounts)
Where:
IDV (Insured Declared Value) = Current market value of the car (excluding depreciation)
Own Damage Insurance Rate = Defined by the Insurance Regulatory and Development Authority of India (IRDAI) and varies based on vehicle type and engine capacity
Loading = Additional charges based on risk factors (e.g., modifications, high-risk locations)
Discounts = No Claim Bonus (NCB), Voluntary Deductibles, and other applicable offers
Example Calculation:
Assume:
OD Premium=(5,00,000×2%)−(20%+5%)\text{OD Premium} = \left(5,00,000 \times 2\%\right) - (20\% + 5\%) OD Premium=(5,00,000×2%)−(20%+5%)=10,000−2,500=₹7,500= 10,000 - 2,500 = ₹7,500=10,000−2,500=₹7,500
Additional Charges:
Who Should Get a Standalone Car Insurance Policy?
A standalone own damage car insurance policy is suitable if you already have a valid third-party insurance policy and want separate financial cover for damage to your own vehicle. It works well if you prefer flexibility in choosing different insurers for third-party and own damage covers.
This policy is particularly relevant for new, high-value, or frequently driven vehicles in city traffic, where the risk of accidental damage is higher. It is also helpful if you want the option to customize coverage with add-ons such as zero depreciation or engine protection. Standalone own-damage insurance can help balance premium costs while providing protection against accidents, theft, and natural or man-made events.
