If you have the insurance price add-on cover then you are eligible for the payout as per the invoice value of your car.
What if your new car gets stolen within the first one or two years of you buying it? Delhi-based Rajneesh Malhotra met with a similar incident recently. His three-month-old car was stolen while he was shopping in one of the upscale markets of South Delhi.
As soon as he realised that his car was stolen, Malhotra filed an FIR (First Information Report) at the nearest police station and informed the insurance company about the theft.
“My insurance claim got accepted and I thought I will receive the full amount (on road price) as I have taken a standard motor insurance policy when I purchased my new car. However, the insurer told me that even if a new car is stolen within a year from it is purchase date, they cannot pay back the original or full cost of the car. Instead, they could only pay the amount that equals to the IDV (Insured Declared Value) of the car as mentioned in the policy document. In effect, it meant that the insurance claim I would get would lesser than the actual cost of the car,” he said.
This left the policyholder unhappy.
How much insurance reimbursement you get in case of car theft?
When you buy a standard motor insurance policy at the time of new car purchase. The insurer fixes the IDV of a new car by deducting depreciation from the invoice value. It is basically the current market value of a car and it is the maximum amount your motor insurance policy pays you when your car gets stolen.
Saxena said that Indian motor tariff gives a schedule of depreciation for arriving at IDV of the vehicle. This IDV represents the market value of the vehicle and remains unchanged during the policy period. This removes any dispute at the time of claim in case the vehicle is reported stolen. “Thus, if the age of your vehicle is not more than 6 months, 5 percent depreciation is deducted when fixing IDV. However, if the age of your vehicle is more than 6 months but not exceeding 1 year, in that case, 15 percent depreciation is deducted when fixing IDV,” he said.
For example, let us say you bought a car worth Rs 8 lakh (ex-showroom price) and got it insured at the time of purchase. At the time of insurance of a new car the IDV is fixed at 5 percent less than the invoice value (i.e., Rs 7.6 lakh) because 5 percent is the depreciation of car once it goes out of the showroom. Let us say the car gets stolen within the first six months of the policy term, the insurer will pay you Rs 7.6 lakh and your policy will end. The IDV value for the first policy term remains the same across all the insurers when you buy a brand-new motor vehicle. However, later on, it can be changed year after year.
Here is what industry expert says on how to get the original cost of the car reimbursed via insurance claim when a car gets stolen.
How you can get complete claim?
For someone like Malhotra, if he would have taken a ‘Return to invoice’ add on with his car insurance policy at the time of purchase, he would have got back the full amount, i.e., the on-road price of the car.
Sanjay Saxena, Head – Motor Claims & Underwriting, Bajaj Allianz General Insurance says, “Return to invoice add-on with comprehensive insurance policy, in case of total loss, theft or constructive total loss of the vehicle, you will get replacement of insured vehicle with a new vehicle of same make, model, specifications and colour subject to availability in the open market. In addition, you will get basic insurance on the new vehicle, cost of its registration, road tax including octroi if any.”
Tarun Mathur, Chief Business Officer- General Insurance, Policybazaar.com said that while buying a car one should take an invoice price add-on when buying insurance for new car to be able to get the invoice value reimbursed from insurer in case of theft of car. It is also referred to as ‘Return to Invoice’ or ‘Gap cover’. It is useful in case of car theft because this cover offsets the depreciation incurred on the car.
“If you have the insurance price add-on cover then you are eligible for the payout as per the invoice value of your car. For say, you have made the claim against the theft of your car which was valued at Rs 10 lakh (on road price) at the time of purchase. But the IDV mentioned in your policy is supposed Rs 9,00,000. Then in case of normal motor insurance policy, you will receive the payout based on your IDV. This way, this add-on bridges the gap of Rs 1 lakh which you paid towards registration charges and road tax as well. However, the important thing you should know that you can avail such add-on only for a new motor vehicle which is not older than 2 years,” he said.
Generally, while taking this add-on, some companies give you full on-road price and some may not give you the full on-road price which means they exclude the insurance premium cost while making final payments.
Mathur says insurance companies like ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Reliance General Insurance provide the on-road price to the insured which includes ex-showroom price, road tax, registration charge, and insurance premium. But there are companies like HDFC Ergo, National India Assurance, The Oriental Insurance Company, which may not include the price of insurance premium while evaluating the on-road price when providing final reimbursement to the insured. In such a case, the price of the add-on also varies from insurer to insurer. “Basically, it all depends upon insurance companies how they have filed their product with the regulator (including add-ons),” he added.
Therefore, in case you wish to buy this add-on, carefully check what it covers at the time of purchase.