Car Insurance Myths Debunked (India Edition)

Common myths vs. the reality

Myth 1: Filing a claim will get my policy cancelled

This is probably the most damaging myth in Indian car insurance. It deters genuine claimants from using cover they have paid for. The reality: IRDAI regulations prohibit insurers from cancelling a policy solely because a policyholder filed a valid claim. What does happen is that filing a claim — particularly an at-fault claim — affects your No Claim Bonus (NCB) at renewal, potentially reducing it from 50% to zero. The NCB impact is real and worth weighing against the repair cost; but the policy itself remains valid.

Myth 2: Third-party insurance covers everything I need

Third-party insurance is the minimum legal requirement — it covers injuries and property damage to others. It pays nothing for your own vehicle. A new car worth ₹10–15 lakh, damaged in an accident, would cost the owner the full repair bill under TP-only cover. The OD (own damage) component of comprehensive insurance, including add-ons like zero depreciation and engine protect, is what protects the vehicle you actually own.

Myth 3: Comprehensive insurance covers everything

Comprehensive cover is broad, but it has exclusions that many policyholders discover only at claim time:

1. Drunk or drugged driving: any accident while the driver is under the influence is excluded — by all policies, without exception.
2. Undisclosed modifications: modifications not declared to the insurer can void the claim for the damaged parts or the entire claim depending on the modification's relevance.
3. Wear and tear: gradual deterioration, mechanical breakdown and electrical failures from age are excluded.
4. Driving without a valid licence: the driver must hold a current, valid licence for the vehicle class being driven.
5. War and nuclear risks: standard exclusions in all Indian motor policies.

Myth 4: Zero depreciation means I pay nothing

Zero-dep (nil depreciation) cover removes the deduction for depreciation on parts replaced during a claim — a significant benefit that can save thousands on a major repair. But it does not mean zero out-of-pocket. You still pay:

1. The compulsory deductible (₹1,000 for sub-1500cc cars; ₹2,000 for larger engines — set by IRDAI)
2. Any voluntary deductible you chose to reduce the premium
3. The cost of consumables (oils, coolant, nuts, bolts) unless you also have a consumables add-on
4. Any limit on the number of zero-dep claims (most policies allow 1–2 per year)

Myth 5: I lose my NCB if I change insurers

NCB is portable. When switching insurers at renewal, ask your current insurer for an NCB certificate (issued within 3 days under IRDAI rules). Present it to the new insurer, who must honour the stated NCB percentage. Many Indian car owners are unaware of this and stay with underperforming insurers to protect NCB they could carry elsewhere.

Myth 6: Online insurance policies are unreliable

All policies sold by IRDAI-licensed insurers — whether through agents, bank branches or directly online — carry identical legal standing. Online policies are typically cheaper because there are no agent commissions. They must be issued digitally (from 2025, IRDAI mandates digital issuance via DigiLocker or insurer app) and can be produced as valid proof of insurance at any checkpoint. The claim process and settlement rights are identical regardless of the sales channel.

Myth 7: I can insure my car for more than its market value to profit from a claim

Insurance in India (as globally) operates on the indemnity principle — you cannot profit from a claim. For OD cover, the maximum payout is the IDV, which is the car's current market value after applying IRDAI's depreciation schedule. Stating an inflated IDV does not increase the payout above market value in a total loss; it only increases your premium. For underwriting purposes, IDV must be declared honestly at its correct value.