Cashless Car Insurance Policy

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What Is Cashless Car Insurance Policy?

The concept of cashless insurance was first introduced in the healthcare domain. With the increase in popularity of the concept, general insurance providers started offering it under their motor insurance plans. Cashless claim facility is nothing short of a phenomenon in the car insurance domain, as it brings with it a suite of advantages that the policyholder can benefit from.

Basically, it is a facility in which the car insurance provider will have tie-ups with authorised garages, referred to as network garages. The policyholder can get his/her vehicle repaired at a network garage after an accident. He/she will not be required to pay for the repair work; instead the insurer will bear the expenses on his/her behalf.

How Does Cashless Motor Insurance Policy Work?

When looking to buy car insurance, you should ideally select an insurance provider that offers cashless car insurance facility. When you buy such a policy, you can avail repair services for your vehicle at some of the best service stations in India. You also need not pay for the repairs upfront, making it a win-win situation altogether!

Here are the steps involved in availing services at a network garage:

  • The customer purchases a car insurance policy from an insurance company that has a wide network of cashless garages.
  • If the insured vehicle meets with an accident, the policyholder can choose to get it repaired at a network garage.
  • After the repairs are completed, the insurance company pays the service centre directly for the work done.
  • The policyholder will only have to pay for the depreciation of replaced car parts and the deductibles. This will be a minimal amount in comparison to the total cost of repair.

What Is Depreciation In Car Insurance?

All vehicles depreciate in value with age. In fact, the moment a spanking new car is driven out of a showroom, it is considered to have depreciated in value by 5%! The depreciation of a four-wheeler is based on a grid that is followed as a standard throughout the industry. The depreciation of a vehicle comes into play when there is an incident of a total-loss claim, such as a car theft.

In addition to the depreciation of the entire vehicle, the parts of a car depreciate at varying rates. The standard depreciation for car parts is as follows:

Car part Depreciation
Parts with high wear and tear - rubber parts, plastic components, battery, tubes and tyres, etc. 50%
Fibreglass parts 30%
Metallic parts 0% to 50%, based on the age of the vehicle

In a partial loss scenario such as a vehicle damage following a minor accident, the depreciation on car parts will be considered at the time of a claim. This, in fact, is a part of the amount that the policyholder will bear in a cashless claim scenario before the insurance company pays the remaining claim amount.

To clarify, if a fibreglass car part was replaced following an accident, 30% depreciation on the cost of the part will be paid by the policyholder.

What Is A Deductible In Car Insurance?

Deductible is another part of the claim amount that the policyholder bears at the time of a cashless claim settlement. In car insurance, deductibles are of two types:

  • Compulsory deductible - This is a fixed value based on the type of vehicle and its engine capacity. The standard guidelines on charging the compulsory deductible are set by the Insurance Regulatory and Development Authority of India (IRDA). The current rates for private cars are as follows:
Engine capacity Compulsory deductible amount
Up to 1,500 cc Rs.1,000
Above 1,500 cc Rs.2,000

The insurance company may charge a higher value for compulsory deductible if the car is very old. It should be noted that the compulsory deductible component does not have any impact on the motor insurance premium.

  • Voluntary deductible - This is an optional amount chosen by the customer at the time of policy purchase. If the customer has selected a high voluntary deductible value, his/her car insurance premium will come down. However, he/she will be required to pay that amount at the unsettling time of a claim. So, if you are a confident driver on the roads who does not raise frequent claims, it makes sense to opt for a high voluntary deductible value and save on premiums.

Steps To Be Followed To Make A Cashless Claim:

When making a cashless claim, there are a few steps you need to follow so as to avoid confusions and delays in claim settlement:

  • As soon as your vehicle is involved in an accident, ensure that you contact the insurance company and report the incident. You should also inform the police and file an FIR if there are serious injuries or death following the accident.
  • The insurer will get the vehicle towed to a network garage where a thorough inspection will be done. You should not attempt to move the vehicle without the consent of the insurance company.
  • The network garage will provide an estimate for the repair work, and this will be examined by the insurer. Following this, the insurance company will provide an approval for the work to commence.
  • The service station then repairs the vehicle and submits the relevant bills to the insurance company. The insurer will examine the bills and other documents submitted.
  • Once all the evaluation and verification is done, the claim payout process will commence.
  • The policyholder will have to pay the amount corresponding to deductibles and depreciation.
  • The insurance company will pay the remaining amount directly to the network garage.
  • If the car was damaged beyond economical repair, it is considered to be a total loss situation. The insurance provider will then make a payment to the customer. This amount will be equal to the market value of the car after accounting for depreciation.
Cashless Car Insurance Policy

Insurers Offering Cashless Claim Settlement Facility:

Some of the car insurance providers offering cashless claim settlement facility to customers are listed 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 garage facility has become a very attractive feature in car insurance, almost all leading motor insurance providers are offering this service today. It is advisable to opt for this facility to ensure hassle-free claim settlement.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

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