Does Car Insurance Cover Theft?
Car insurance is meant to provide financial protection against unfortunate and inevitable losses. Theft is one of these, and so, a comprehensive car insurance policy covers car theft. Under this insurance policy, the insurance company compensates if the car is stolen. The compensation depends on the IDV (Insured Declared Value).
You may also purchase the “loss of personal belongings” add-on cover. With this add-on, you get additional coverage for personal belongings inside the car. So, if the car gets stolen along with the listed belongings inside, the entire loss is compensated.
Note: Car theft insurance is typically only covered under comprehensive car insurance and not a third-party insurance policy.
Car Theft Insurance Claim: Process
Raising claims for car theft insurance is easy. Your insurer ensures you don't have to hustle in such times of emotional and financial loss.
Understanding the process of car theft insurance claims helps you stay updated and alert during such incidents. Here are the steps you need to follow if your car gets stolen:
1. Step 1: File an FIR
The first step is reporting an FIR at the nearest police station. This is because theft is also a legal case, and so, a nearby police station must be informed about the same.
2. Step 2: Inform Your Insurer
After you have filed an FIR, you should notify your insurance provider about the theft. You may also be required to submit a copy of the FIR. It is best to inform your insurer as soon as possible so that further processes can be done as soon as possible.
3. Step 3: Raise a Claim
The next step is raising an insurance claim. You may raise a claim by visiting a nearby office of your insurer or by submitting the claim form online.
4. Step 4: Submit Proofs & Documents
While raising a claim, you will also be required to submit the required documents. It may include identity proof, policy papers, proof of vehicle, etc.
5. Step 5: Inspection by Insurer
The insurance company will begin its inspection based on your claim. If the car is not found even after inspection, the insurance company compensates the policyholder for the loss.
6. Step 6: Final Claim Settlement
The final step is claim settlement with compensation for car theft. The amount is decided based on the insured declared value (IDV). The amount will be disbursed into the policyholder's registered bank account.
Enhance your car coverage. Go through the list of various car insurance add-ons.
How is the Car Insurance Theft Claim Settled?
When your car is stolen, car insurance assures financial compensation. The amount paid by the insurer is based on the IDV (Insured Declared Value) of your car. IDV is the maximum amount that insurance companies agree to pay to the car owner if it gets stolen, lost, or sustains damage beyond repair. Typically, the IDV amount is less than the purchase price of the car, and continues to decrease over time, due to depreciation.
Keep in mind that the IDV is decided between the insurance company and you, the policyholder, at the time of purchasing car insurance.
Let’s take a look at this example. Ritesh Singh is a 32-year-old businessman in Delhi. Last month, his brand-new car was stolen. Heartbroken, he lodged an FIR and raised an insurance claim. Since his car was less than 6 months old, Ritesh was compensated according to the IDV with a 5% depreciation deduction.
For instance, if the car’s value was ₹8 lakhs, he would be eligible to receive ₹7.6 lakhs. This is after deducting the 5% depreciation cost.
Note: The depreciation value of motor vehicles keeps increasing with their age.
Get the Invoice Value of Your Car: Return To Invoice Add-on
It is possible to get the complete value of your car in case it is stolen. This is possible when you have a “Return to Invoice” add-on cover. With this add-on, you get the ex-showroom price of the car, including road tax and registration fees (if reflected on the invoice).
Return to invoice is an additional coverage that you can purchase with a comprehensive car insurance policy. This add-on means you get the invoice value of your car as compensation if it gets stolen, lost, or damaged beyond repair. This add-on reduces the difference between the depreciated IDV and the original car price.
Note: Return to Invoice add-ons are typically only available for new vehicles (mostly up to 2 years).
How Depreciation Affects Motor Vehicles?
Motor vehicles are depreciating assets. This means they start losing their market value the moment you take them out of the showroom. At the time of claim settlement, the depreciation cost is deducted from the final amount.
The IRDAI (Insurance Regulatory and Development Authority of India) has set standard guidelines for depreciation deductions from insurance claim amounts. This remains the same for any motor insurance company. The table below shows the depreciation rates of a motor insurance vehicle over the years:
Referring to this chart, insurance providers deduct depreciation rates from the final claim amounts.
To Conclude
Realising your car is stolen can be heartbreaking and stressful. However, having the right car insurance coverage gives your car the much-needed safety net. You get compensation for your vehicle from your insurer in case the car is stolen. While depreciation costs are deducted from the claim amount, having the 'Return to Invoice' add-on can result in receiving the entire invoice amount.
Over and above this, investing in modern safety tools such as GPS trackers, anti-theft alarms, steering locks, and immobilisers can not only protect your car from theft but can also help you reduce your insurance premium.
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