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Glossary: Motor Insurance

Accessory

  • The term generally refers to those parts which are not supplied by the manufacturer along with the equipment /vehicle and are not essential for the operation/running of the equipment/vehicle.
  • The term generally refers to those parts which are directly supplied by the manufacturer along with the equipment /vehicle but which are not essential for the operation/running of the vehicle.

Accident - An unlooked for mishap or an untoward event which is not expected or designed

Accident Frequency - A measurement of number of accidents occurring in a given period

Act of God

  • An extraordinary interruption by a natural cause (as a flood or earthquake) of the usual course of events that experience, prescience, or care cannot reasonably foresee or prevent.
  • Any event not caused or contributed to by man. Some sudden and irresistible acts of nature that could not reasonably have been foreseen or prevented, such as floods or exceptionally high tides, storms, lightning, earthquakes etc. constitute Act of God Perils.

Cancellation of Insurance-Motor

  • A policy can be cancelled only after ensuring that the vehicle is insured elsewhere and the original Certificate of Insurance of the policy that is cancelled is surrendered.
  • Insurer should inform the Regional Transport Authority by registered A.D. about the cancellation of the insurance.

Arbitration - An alternative way of settling insurance disputes that would otherwise be settled in a court of law. The insurer and the aggrieved party agree upon a third person to look into the case and decide on the claim.

Break-In - A comprehensive policy that has expired and the customer propose to seek insurance for the same vehicle is a break-in policy.

Catastrophe - A violent and sudden change in a feature of the earth; a violent usually destructive natural event (as a supernova); calamity; cataclysm; disaster; debacle; tragedy.

Cubic Capacity

  • Cubic Capacity of the engine of a vehicle.
  • The volumetric capacity of a vehicle. It is one of the variables that determines the premium payable to insure a vehicle. As the cubic capacity increases, so does the premium rate.

Certificate of Insurance - The Motor Vehicle Act, 1988 requires the insurance company to issue a Certificate of Insurance as a proof of insurance to satisfy the legal requirements under the act. This has to be carried at all times with the vehicle and is subject to inspection by traffic authorities.

Claim - This is a written request, by the insured, to the insurance company, to cover an incurred loss, usually submitted on the company’s standard form. According to IRDA guidelines, insurers have to set - the claims within 90 days; generally, though, for valid claims, they do it in less.

Comprehensive policy - This form of a policy covers both the “Act” liability as well as Own Damage losses.

Compulsory Deductible/ Compulsory excess - Compulsory excess is the amount of loss that has to be borne by the insured compulsorily for each and every claim.

Contribution - The principle of contribution states that if any subject matter of insurance is insured under two or more insurance contracts, the loss is to be shared pro-rata between the insurers involved, often in proportion of the sum insured.

Cover - Used interchangeably for insurance, this also refers to the amount of insurance.

Cover Note - The document issued by insurers in non-life insurance, giving temporary cover till the issue of a formal policy.

Deductible - An arrangement in several non-life insurance categories where a portion of the insured loss is borne by the policyholder, and remainder by insurer.

Depreciation

  • Depreciation refers to the decrease in the value of an asset by use and by normal wear and tear. As depreciation is inevitable for virtually all assets, the same is not covered by insurance unless the policy wordings explicitly mention the same.
  • A decrease in the value of any object or property over a period of time due to age, wear and tear, or obsolescence. Depreciable items are insured on the basis of their depreciated value, not their original cost or replacement value.

Driving License - Means the license issued by a competent authority under Chapter of the Motor Vehicles Act, 1988 authorizing a person specified therein to drive, otherwise than as a Learner, a motor vehicle or a motor vehicle of any specified class or description.

Exclusions - This is referred to the risks and circumstances not covered by a policy. No claim will be entertained in case of losses arising out of such situations.

Failure of brakes - Breaks of the insured vehicle failing to perform their function leading to a road accident. Only consequential damages are covered under the policy.

Grace Period - Period of time, after the due date of a premium, during which the premium can be paid, and the policy prevented from lapsing. There’s a grace period of one month on the yearly, half-yearly and quarterly modes of premium payments, and 15 days on the monthly mode.

Gross Vehicle Weight - Means in respect of any vehicle, the total weight of the vehicle and registered by the Registering authority as evidenced by the registration certificate(RC) issued by the Regional/State Transport Authority.

Hit and Run accident

  • An accident arising out of the use of a motor vehicle or motor vehicles, the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose. (S. 161, Motor Vehicles Act, 1988)
  • Accident arising out of the use of motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.

Hypothecation - To pledge as security without delivery of title or possession usually in consideration of loan.

Immediate Repairs - Vehicle needing minor repairs to be carried out following an accident when without that it can not be moved from the place of accident to the repairer's garage. This expenditure incurred by the insured is allowed under the policy lest there should be aggravation of damage to the vehicle if not removed immediately.

Insured's Declared Value --IDV

  • Insured’s Declared Value or IDV is deemed to be the Sum Insured for the purpose of the policy and is fixed at the commencement of each policy period for the insured vehicle.
  • The amount for which a vehicle is insured. It is the depreciated value of the vehicle, based on the manufacturer’s selling price and model, and its accessories.

Insured - The policyholder.

Insurer - The insurance company.

Lag - The period that has elapsed between when claims actually occurred and when actually paid.

Liability - Liability means legal responsibility for one's acts or omissions, legally enforceable obligation.

Liability only policy (also called Act only policy) - This covers Third Party Liability for bodily injury and/ or death and Property Damage arising out of use of the vehicle under insurance . Personal Accident Cover for Owner-Driver is also included and is compulsory.

Light Motor Vehicle (LMV) - A transport vehicle or omnibus, the gross vehicle weight (GVW) of either of which or a motor car or a tractor or a toad roller, the unladen weight of any of which does not exceed 7,500 Kgs.

MACT - MACT stands for Motor Accidents Claims Tribunal. For the speedy disposal of third party claims at minimal expense, the Claims Tribunals have been constituted by different state governments in India under section 110 of the Motor Vehicles Act, 1939. Such tribunals are presided over by a person of the rank of a District Judge or High Court Judge.

Market Value - The monetary value an object or property will fetch if sold in the market today.

Material Fact - Any fact, the disclosure of which, may affect the decision of an insurance company, either with respect to writing a cover, settling a loss, or determining a premium. Usually, the misrepresentation of a material fact will annul a policy.

Maturity Date - The date on which a policy term comes to an end or when the policyholder dies.

Network Hospitals - The hospitals which have a tie up with your insurer would come under the category of network hospital. The network hospital provides cashless facilities to the insured on approval by the insurer.

No-Claim Bonus

  • A discount given on renewal of cover in select non-life insurance categories (usually, vehicle, health and house) to policyholders for not making a claim in the preceding year.
  • A reduction as a percentage in the manual or the prospectus premium at the time of renewal of the policy based on favorable claims experience in the previous year/s policy/ies for the same insured property against the same insured perils.

No Claim Refund - Portion of premium agreed under the policy to be refunded to the insured in the event of no claim being reported or paid during the entire policy period. It is customary for the insurance companies to link this. with the renewal of the policy to ensure renewal with them without fail.

Own Damage - Under comprehensive motor policy, the Own Damage section covers you against any loss or damage caused to your vehicle or its accessories due to natural and manmade calamities as defined in the scope of coverage besides the third party damages.

Package policy - This form of a policy covers both the “Act” liability as well as Own Damage losses.

Perils - Perils are accidental occurrences. Eg. Fire, flood, breakdown, lightning, earthquake. A peril may cause damage to an asset.

Portability - Under Portability the insurance customer can switch from one insurer to another insurer, the credit on continuity of the coverage would be passed on from the previous insurance policy to the new insurance policy.

Preferred Garage - The garages which have a tie up with your insurer would come under the category of preferred garages. Generally, the preferred garages provides cashless facilities to the insured on approval by the insurer.

Retention of risk - Retention of risk refers to the decision of a party who is exposed to a risk to bear losses, if any.

Risk - Risk refers to the possibility of losses or damages.

Spot Assistance/ 24*7 - Instant claims assistance and SMS updates on your motor claim status through our 24x7 call-centers. Towing facility in an event of a breakdown/accident 24x7 service by phone or online even on holidays.

Subrogation - The principle of subrogation provides that the insurers are entitled to succeed to the rights and remedies of the insured once the insurance company has undertaken to compensate for the losses of the insured and normally enforced through letter of subrogation in total loss and third party legal cases.

TPA - Third party administrator. A TPA is a contractor that adjusts and ad-ministers insurance claims.

TPPD - TPPD means Third Party Property Damage. Currently, the maximum limit of insurer’s liability is Rs. 7,50,000 for private cars and Rs. 1,00,000 for two-wheelers.

Vintage Cars - Cars manufactured prior to 31-12-1940 are classified as vintage cars by the Vintage and Classic Cars Club of India.

Vehicles subject to Hypothecation Agreement - It is not permissible to issue policies in the joint names of Pledge and Registered Owner of the vehicle. Policies must be issued in the name of Registered Owner of the vehicle and the Pledges interest protected by the use appropriate Endorsement.

Zones (Geographical area) - Zone A refers to the cities Ahmedabad, Hyderabad, Pune, Bangalore, Delhi, Mumbai, Chennai and Kolkatta. The rest of India is categorized as zone B.

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