Looking at some common exclusions from motor insurance policies.
It’s mandatory by law to own a third-party insurance for your vehicles. Third party is any party apart from you or the insurance company that may suffer damages due to an accident caused by your vehicle. However, one must always buy comprehensive insurance which covers not just third party liabilities but also damages to one's own vehicle and self. That said, there are certain damages that insurance does not ordinarily cover. Let’s look at them, and also see how these exclusions too can be covered by extending the coverage.
DAMAGE DUE TO RACING
Damage caused to your vehicle due to participation in illegal activities is not covered by any motor insurance policy. A wide range of activities can be deemed illegal. Racing, often the pass-time of adventurous youths, isn’t covered. Neither are damages caused after driving under the influence of intoxicants, breaking traffic laws, or driving without a license, etc. Follow the law to not just drive safely but also to avoid claim rejections.
WEAR & TEAR
Damages caused to your vehicle due to wear and tear brought about by its normal usage will not be covered by insurance. This also includes any loss in value due to the depreciation of your vehicle. As you may have noticed, whenever you renew your vehicle insurance, the vehicle’s Insured Declared Value is lowered to account for yearly depreciation. The effects of wear and tear as well as depreciation can be removed by taking a zero-depreciation insurance cover where your vehicle is insured at its full value.
ACT OF WAR
A typical vehicle insurance policy will cover damages caused by natural calamities such as flood and earthquakes. It will also cover damages from theft and fire, and even man-made hazards such as riots and terror attacks. However, acts of war, nuclear attack, foreign invasion, civil war, nuclear radiation and damage from related events are not covered.
DAMAGE TO NON-COVERED PARTS
Electrical failures, damage to tyres outside of an accident, damage to electrical equipment such as stereo, costs of consumables such as coolants, petrol, and other fluids, and mechanical breakdowns that are non-accidental in nature may not be covered. Non-accidental damage to engine may not be ordinarily covered. However, an engine protection add-on can be used to provide full coverage — including for mechanical and electrical failures — of the engine or other electrical parts. This would also cover what we call consequential damages such as damage to the engine caused by driving the car through water-logged areas.
DAMAGES CAUSED DURING INSURANCE EXPIRY
A lapsed insurance policy can be renewed, subject to terms and conditions. However, damages caused to your vehicle while its insurance had lapsed will not be covered. Ensure that you renew your policy in a timely manner, and do your bit to reduce the large-scale problem of non-insured vehicles plying India's roads.
— The writer is CEO, BankBazaar.com