Car insurance is seen more as a legal obligation and less as a tool to help protect you against financial losses arising from any accident or mishaps that involve your car. While the IRDAI has made third-party liability cover mandatory for all cars in India, most car owners are happy buying just that without realizing that it does not cover any losses to your own car if there is an accident or theft of the vehicle. Car insurance policies that offer protection against damages to your car by adding Own Damage cover are available as comprehensive policies that usually have a higher premium. Therefore, many car owners stick with the mandatory third-party cover and realize their folly when the car needs repairs due to a mishap or accident.
Own Damage cover in Car Insurance
As the name suggests, OD or Own Damage means damage to your car. As explained above, the third-party liability cover in car insurance offers protection against damages to a third party in case of an accident. It does not offer reimbursement for repairs or the total loss of your car. Imagine a situation where you accidentally bump into a car, and both the vehicles suffered minor damages. If you have a third-party liability cover alone, then your policy will cover the cost of repair of your neighbour’s car, but you will have to fix your car at your own expense.
However, if you include the Own Damage cover in the policy, then the insurer will cover the cost of repairs to your car too. These policies are called comprehensive policies that offer third-party, as well as OD cover. Additionally, the OD cover offers protection against losses arising due to the damages caused to your car by man-made and natural disasters. Major insurers offer an option to buy car insurance online where you can select the add-ons after reading through all the fine print.
What does the OD cover include?
The OD cover offers financial protection under the following conditions:
- Damages to your car in case of an accident or a collision
- Damages to your car in case of a natural calamity like an earthquake, flood, cyclone, etc.
- Theft of your car
- Damages to your car in case of man-made disasters like riots, vandalism, terrorism, arson, etc.
Most comprehensive car insurance policies also include a Personal Accident Cover for the owner-driver of the car. The insurer offers compensation of up to ₹15 lakh for physical injury or death of the owner-driver in the case of an accident.
How does the OD cover affect the premium?
First, let’s look at how the OD premium is calculated.
Most insurers consider the following factors while calculating the OD premium:
- Model and make of the car
- Age of the car
- The Insured Declared Value or IDV
- The geographical location where the car is registered
- The car’s cubic capacity
- Your personal details like marital status, age, gender, etc.
Most comprehensive car insurance policies that include Own Damage cover also offer a wide range of add-ons to help you customize the policy as per your requirements. These add-ons come at an additional cost. Hence, while calculating the premium, the insurer takes all these costs and discounts (if any) into consideration.
While there is a difference in premium between a third-party cover and a comprehensive cover, the benefits easily outweigh the costs.
Standalone Own Damage Insurance
With effect from September 1, 2019, the IRDAI has allowed car owners to purchase a standalone Own Damage insurance policy. Earlier, it was mandatory to purchase an own-damage insurance policy bundled with a third-party policy. However, while the third-party (TP) policy still remains a mandatory requirement, car owners can now purchase a standalone Own Damage policy. This extends a lot of flexibility as you can purchase an Own Damage cover at any date and from any insurer. Earlier, car owners had to purchase both OD and TP cover together from the same insurer. Most car insurance companies like Tata AIG are offering standalone Own Damage insurance with a wide array of add-ons or riders to help car owners customize the policy as per their needs.
Do you need an OD insurance?
As long as your car is driven on the roads or uses a public space for being parked, the chances of a mishap cannot be ignored. Hence, protecting yourself against the financial losses due to any damage to your car seems like a logical decision. While the premium amount will increase from what you were paying for a third-party liability-only policy, the benefits it can offer when the damages happen, make it cost-efficient.
Remember, insurance is about creating a safety net in the event of an unfortunate event. While you can be a safe driver and extremely careful while on the roads, accidents can still happen. Although insurance cannot help you avoid them, it can definitely minimize the financial losses. While the IRDAI mandates you to have third-party liability insurance, an Own Damage cover can ensure that your car’s damages do not burn a hole in your pocket. Choose wisely. Good Luck!