The Complete Guide to Motor Insurance Globally
Everything you need to know — from the difference between third-party and comprehensive, to IDV, zero depreciation, NCB, and how to actually compare policies. With real ₹ examples throughout.
1. Types of Motor Insurance
There are two main categories of car insurance Globally. Third-party (TP) is mandatory by law. Comprehensive is optional — but without it, damage to your own car is entirely your expense.
| Feature | Third-Party Only | Comprehensive |
|---|---|---|
| Legally Mandatory? | Yes | No (includes TP) |
| Covers damage to others? | Yes | Yes |
| Covers damage to YOUR car? | No | Yes |
| Covers theft of YOUR car? | No | Yes |
| Add-ons available? | Very limited | Yes (Zero Dep, RTI, etc.) |
| Typical annual cost | ₹2,000–₹4,000 | ₹8,000–₹25,000+ |
2. IDV — The Most Important Number in Your Policy
IDV (Insured Declared Value) is the maximum amount your insurer will pay if your car is stolen or declared a total loss. It is calculated as the manufacturer's ex-showroom price minus depreciation based on your car's age.
| Car Age | Depreciation on IDV |
|---|---|
| Less than 6 months | 5% |
| 6 months – 1 year | 15% |
| 1 – 2 years | 20% |
| 2 – 3 years | 30% |
| 3 – 4 years | 40% |
| 4 – 5 years | 50% |
| Beyond 5 years | Mutually agreed |
Source: IRDAI Schedule of Rates — Circular No. IRDAI/NL/CIR/MISC/143/09/2022. IDV depreciation rates are mandated by IRDAI and apply uniformly across all licensed general insurers. irdai.gov.in
Some insurers artificially lower your IDV to offer a cheaper premium. A lower IDV = lower premium — but also lower payout in a total loss. Always verify your IDV matches the formula above before renewing.
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3. Add-Ons Worth Buying
Zero Depreciation
✅ Almost always worth it for cars under 5 years
Removes depreciation deduction on replaced parts. Without it, 50% of plastic/rubber replacement cost is your expense. Cost: 15–25% extra on OD premium.
Return to Invoice (RTI)
✅ Strongly recommended for cars under 2 years
On total loss, pays you the original invoice price — not the depreciated IDV. On a ₹10L car, this can mean ₹1.5–2L more in your pocket at claim time.
Engine Protection
✅ Worth it in flood/monsoon-prone cities
Standard policies exclude engine damage from water ingress or oil leakage. Engine Protection covers this. Particularly valuable in Chennai, Mumbai, and Kolkata.
NCB Protection
⚠️ Worth it only at 35%+ NCB
After a claim, your NCB does not reset if you have this add-on (limit: 1 claim/year). At 50% NCB (₹5,000+ savings), one claim would cost you ₹1,000+ in NCB loss — NCB Protection prevents this.
Roadside Assistance
⚠️ Optional — check your credit card first
Covers towing, flat tyre, fuel delivery, and key lockout. Many premium credit cards include RSA free. Check before paying for it separately.
Consumables Cover
✅ Recommended with Zero Dep
Standard policies don't cover oil, coolant, nuts, and bolts replaced during repair. This add-on does. Should be paired with Zero Dep for complete coverage.
4. NCB — Your Built-Up Discount
NCB (No Claim Bonus) is a discount on your own-damage premium for every claim-free year. It grows from 20% after year 1 to 50% after 5 consecutive claim-free years. Filing any own-damage claim resets it to 0%.
| Claim-Free Years | NCB Discount | On ₹10,000 OD Premium — Savings |
|---|---|---|
| 1 year | 20% | ₹2,000 |
| 2 years | 25% | ₹2,500 |
| 3 years | 35% | ₹3,500 |
| 4 years | 45% | ₹4,500 |
| 5+ years | 50% | ₹5,000 |
5. What's NOT Covered (Standard Exclusions)
Every comprehensive policy has a set of standard exclusions. Knowing these in advance prevents nasty surprises:
Driving under the influence (DUI)
Any accident while intoxicated — no coverage at all
No valid driving licence
If any driver (including family members) was driving without a valid DL
Mechanical or electrical breakdown
Engine failure from wear and tear — not covered without add-on
Tyre damage alone
Tyre punctures or burst tyres without bodily accident damage
Consequential loss
Driving through a flooded road and the engine hydrolocks — excluded without Engine Protection add-on
War, nuclear risk, radioactivity
Standard across all insurers globally
Using private car for commercial purposes
Driving for Ola/Uber on a private car policy voids coverage
6. How to File a Motor Insurance Claim
Notify the insurer immediately
Call your insurer's claims helpline or the TPA within 24 hours of the accident. Delayed notification can lead to claim rejection.
Do not move the vehicle until surveyed (major damage)
For accidents with significant damage, a spot surveyor may be dispatched. Moving the vehicle without documentation can complicate the survey.
File an FIR (for theft or third-party injury)
FIR is mandatory for theft claims. For accidents involving injury to others, file an FIR regardless.
Take the vehicle to a network garage for cashless
For cashless claim, the garage directly bills the insurer. You pay only the deductible and any non-covered amounts. For reimbursement, you pay the garage and claim later.
Submit claim documents
Policy copy, DL, RC book, FIR (if applicable), repair estimate, photographs of the damage, and the signed claim form.
Surveyor inspection and approval
The insurer appoints a surveyor who assesses the damage and approves the repair estimate. For cashless, approval comes to the garage directly.
7. How to Compare Motor Insurance Policies
Do not compare only premium. Premium is the price — but coverage is the value. A ₹5,000/year cheaper policy may cost you ₹30,000 more at claim time. Evaluate these in order:
1. IDV
Is the IDV fairly calculated? Verify against the IRDAI formula.
2. Claim Settlement Ratio
Above 95% is good. Check IRDAI annual report — not the insurer's marketing.
3. Add-ons Included
Zero Dep, Consumables, Engine Protection — are they bundled or separate?
4. Garage Network
Check cashless garage count in your city specifically.
5. Claim Process Reviews
Look for real user reviews on claim experience — not overall company rating.
6. Premium
Compare after making IDV and add-ons equivalent across quotations.
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