Cashless Car Insurance Policy

The cashless insurance concept was first launched in the healthcare domain. With the increase in popularity of the idea, the insurers started it under the car insurance plans as well.

In cashless claim facility, the car insurance providers have tie-ups with authorized garages, also known as the network garages where the policyholders can get the vehicle repaired after an accident. The insured person will not be required to pay for the repair work; instead, the insurer will bear the expenses on behalf of the policyholder.

How Does Cashless Insurance Work?

While looking for car insurance, the person should ideally select an insurer that offers the cashless car insurance facility. Buying such a policy can let the policyholder avail repair services at the authorized service stations in India without paying money.

Here are the steps to avail the services at a network garage:

• The customer buys a car insurance policy from the insurer that has an extensive network of the cashless garages.
• If the insured vehicle gets damaged due to an accident, the policyholder can get it repaired at the network garage.
• After the completion of repairs, the insurer pays to the service center directly.
• The policyholder will only be required to pay for the depreciation of replaced car parts and the deductibles which would be a less payable amount in comparison to the total cost of repair.

What is Depreciation in Car Insurance?

All the vehicles depreciate with age. The moment a new car is driven out of a showroom, it is considered to be undervalued by 5%. The depreciation of the four-wheeler is based on a grid that is followed as the standard throughout the industry. The devaluation of the entire vehicle is considered during an incident of total-loss claims, such as car theft. In a partial loss scenario such as minor vehicle damage in an accident, the depreciation on the car parts will be considered during the claim. It is the amount that the policyholder will have to bear in a cashless claim case before the insurer pays the remaining claim amount.

To clarify, if a fiberglass car part was replaced after an accident, 30% depreciation cost on that part will be paid by the policyholder.

Deductibles in Car Insurance

The deductible is another part of the claim amount that the policyholder, has to bear during cashless claim settlement. In car insurance, the deductibles are of two kinds:

• Compulsory deductible - It is a fixed value decided by the type of vehicle and engine capacity. The IRDAI sets the standard guidelines for charging the compulsory deductibles. The current rates for personal cars are as follows:

  • The capacity of Engine           Compulsory deductible

    Up to 1,500 cc                                    Rs.1,000

    > 1,500 cc                                          Rs.2,000

  • The insurer may charge a higher amount for the compulsory deductible if the car is age-old. It should be noted that the amount paid in the compulsory deductible component does not have any impact on the motor insurance premium.
• Voluntary deductible - It is an arbitrary amount chosen by the customer during policy purchase. If the customer has selected a higher deductible value, then the car insurance premium will come down. However, the customer will be required to pay that amount during claim settlement. So, if you are a confident driver on the roads and do not raise numerous claims, then opt for a high voluntary deductible value and save on premiums.

Steps for Cashless Claim

While making the cashless claim, there are a few steps that are required to be followed to avoid confusions and delays in claim settlement:

• As soon as the insured vehicle is involved in an accident, contact the insurance company and report about the incident. Also, inform the police and file an FIR if there are any serious injuries occurred or death happened in the accident.
• The vehicle would be towed to a network garage through the insurer where a thorough inspection will be conducted. It will help if you do not attempt to move the car without the consent of the insurer.
• The network garage will give an estimate of the repair work which will be examined by the insurer. Following this, the insurance company will approve the repair work to start.
• The service station will repair the vehicle and submit the relevant bills to the insurer. The insurer will check the statements and other filed documents thoroughly.
• Once the evaluation and verification are done, the claim payout process will be initiated.
• The policyholder will have to bear the cost corresponding to deductibles and the depreciation.
• The insurer will pay the remaining amount to the network garage.

If the car is damaged beyond the economical repair, it is considered a total loss situation. In such a case, the insurer will make the payment to the customer. This amount will be equivalent to the market value of the car after accounting for the depreciation.

Some of the insurers offering cashless claim settlement facility to customers are mentioned below:

Insurance company         No. of network garages

ICICI Lombard                  More than 3,500

Chola Insurance               More than 3,750

HDFC ERGO                   More than 4,800

Bharti AXA                       More than 2,500

IFFCO-TOKIO                 More than 3,400

As the cashless insurance claim facility has become a desirable feature in the motor insurance, almost all the leading car insurance providers are offering this service today. It is advisable to opt for this facility to ensure the hassle-free claim settlement.