Page 303 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Man made Calamities: Burglary, theft, riot, strike, malicious act, accident by external means,
terrorist activity, any damage in transit by road, rail, inland waterway, lift, elevator or air.
Motor insurance provides compulsory personal accident cover for individual owners of the
vehicle while driving. One can also opt for a personal accident cover for passengers. The third
party legal liability insurance is compulsory.

Third party legal liability protects against legal liability arising towards others due to accidental
damages. It includes any permanent injury, death of a person and damage caused to his property.

Basis of Premium Charges

Depending on the regulations, the insurance premium can be either mandated by the government
or determined by the insurance company in accordance to a framework of regulations (tariff) set
by the government. Often, the insurer has more freedom to set the price on physical damage
coverages than on mandatory liability coverages.
In case of non-mandated insurance-premium, the premium is calculated usually from the
calculations of an actuary based on statistical data.

Various factors like the car characteristics, the coverage selected (deductible, limit, covered
perils) and the usage of the car (commute to work or not, predicted annual distance driven).

Insured's Declared Value (IDV)

1. In case of vehicle not exceeding 5 years of age, the IDV has to be arrived at by applying the
percentage of depreciation specified in the tariff on the showroom price of the particular
make and model of the vehicle.
2. In case of vehicles exceeding 5 years of age and obsolete models, they have to be insured
for the prevailing market value of the same as agreed to between the insurer and the
insured.

What is not payable under the policy?

1. War perils, nuclear perils

2. Consequential loss, depreciation, wear and tear, mechanical or electrical breakdown
3. Damage suffered due to driving the vehicle under the influence of intoxicating liquor or
drugs

4. Claims arising outside the specified geographical area
5. Claims arising when the vehicle is driven by a person without valid driving license
6. Contractual liability.

Special Points

1. Transfers: In case of change of ownership, one must ensure to affect the transfer of Insurance
policy within 14 days from the date of transfer of ownership.
2. Change of Vehicles: A vehicle can be substituted by another vehicle for the same class, for
the balance period of a policy subject to adjustment of premium, if any, on pro-rata basis
from the date of substitution.

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