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Insurance Terminology

As with many other industries, the insurance industry uses industry-specific terminology that is often difficult to understand. We have provided a glossary of common terms that are used on this page.

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Agent (producer)

a.) An insurance salesperson.
b.) An independent agent who does work for any insurance company and sells the policies of more than one insurer;
Broker:
An insurance sales person who deals with agents and companies to find the right insurance policy for the customer.

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ARAI

The Automobile Research Association of India is a non-profit co-operative industrial research organisation formed by the Indian automotive industry. Affiliated to Ministry of Industry, Government of India. The institute is an autonomous organisation registered as a research association under the Societies Registration Act XXI of 1860. ARAI is a Ministry of Road Transport & Highway Government of India's authorized certification agency. Major certification activity is performed at ARAI. It helps the Government of India to formulate automotive standards as well as provide technical support. ARAI also carries out sponsored research for the automotive industry in the area of engine, emission, structural dynamics, NVH, electronics etc.

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Claim

A person's request for payment by an insurer for a loss covered under a policy. Your claims to your company are " first-party claims." Claims made by one person against another person's insurance company are known as "third-party claims."

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Collision Coverage:

Optional insurance that pays for damage to your car caused by collision with another car or object, or by a car rolling over. This is frequently required if you have a car loan.

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Comprehensive physical damage coverage

Optional insurance that pays for damage to your auto caused by something other than a collision or the car rolling over, such as fire, theft, vandalism, flood or hail. This is frequently required if you have a car loan.

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Conditions

These are part of an insurance policy that states your obligations and those of your insurance company in order for the policy to be in effect.

Part of an insurance policy that states your obligations and those of your insurance company in order for the policy to be in effect.

Deductible

A "deductible" is the amount which you agree to pay per claim or per accident. This is subtracted from the total amount paid by your insurer. If the claim is Rs 50,000 and your deductible is Rs 10,000, you pay Rs 10,000 and you insurance company will pay Rs 40,000. The higher the deductible, the lower your payment will be for the policy, but the more you will have to pay out of your pocket if you file a claim.

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IDV

The Insured's Declared Value is a manufacturer’s listed selling price less depreciation as per following table:

AGE OF THE VEHICLE

% OF  DEPRECIATION  FOR  FIXING  IDV

Not exceeding  6 months

5%

Exceeding 6 months but not exceeding 1 year

15%

Exceeding 1 year  but not exceeding  2 years

20%

Exceeding 2 years  but not exceeding  3 years

30%

Exceeding 3 years  but not exceeding  4 years

40%

Exceeding 4 years  but not exceeding  5 years

50%

Note. IDV of  obsolete models of  vehicles   (ie. Models which the manufacturers have discontinued to manufacture) and vehicles beyond 5 years of age will be determined on the basis of an understanding between the insurer and the insured.

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Insurance Department

This is a state agency that enforces rules for the insurance business in each state. These departments are valuable sources of information about all types of insurance as well as handling consumer inquiries and complaints.

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Insurance company

A company that, in exchange for a fee (known as a premium), agrees to pay all legitimate claims that may arise under your policy.

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Liability

A legally enforceable financial obligation.

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Liability coverage:

Insurance that pays other people's losses that you have caused unintentionally or through negligence.

  • Bodily injury liability coverage pays the medical costs of others and your legal defense costs if your car injures or kills someone.
  • Property damage liability coverage pays the claims against you if you damage someone else's car or property.

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NCB

If you do not make a claim during the policy period, a No Claim Bonus (NCB) is offered on renewals. Insurers reward policyholders for not making claims by giving them a discount on the OD premium up to a maximum of 50%. However, it should be noted that a NCB will be allowed provided the policy is renewed within 90 days of the expiry date of the previous policy.

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Negligence

Failure to exercise a generally acceptable level of care and caution.

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OD Premium

Own Damage (OD) premium is the cover over and above the mandatory third-party cover. Payment of OD premium entitles you to claim compensation in case of theft or damage of your vehicle due to fire, earthquake etc.

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Personal Accident Cover

Additional premium is charged for unnamed passengers in your car. The maximum cover that can be availed under this section is Rs 2 lakh for each passenger. Driver is not considered to be a passenger.

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Policy Period

The amount of time for which the insurance contract (policy) lasts.

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Policy Holder

The person who purchases insurance.

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Premium

The amount a policy holder pays for insurance coverage.

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Proof of loss

Documents that you give to the insurer to support your request for payment of losses. The company uses these documents to determine whether and how much it will pay. (Examples: written repair estimates from auto body shops, police reports.)

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Uninsured motorist coverage:

Insurance, which pays for your costs resulting from an accident involving a hit-and-run driver, or a driver who does not have insurance.

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Zone

For the purpose of rating, the whole of India has been divided into the following zones depending upon the location of the office of registration of the vehicle concerned. There are two zones defined for private cars:

  • Zone A: Ahmedabad, Bangalore, Chennai, Hyderabad , Kolkata, Mumbai, New Delhi and Pune.
  • Zone B: Rest of India

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