A motor insurance policy may look straightforward. Buy third-party cover, add own-damage protection and file a claim when something goes wrong. But claim disputes often arise from details that policyholders overlook—from an expired driving licence to previous scratches, incorrect disclosures or missing add-ons.
Take the case of Jamnagar-based Chirag Andani (23). His Honda City collided with a cow, following which sudden braking and swerving caused the car to hit an electric pole and stones, damaging the front and rear. The insurer rejected the claim, saying the damage did not match the reported accident.
Andani approached the ombudsman. “The ombudsman noted that the surveyor and investigator had not obtained CCTV footage to establish the car’s pre-accident condition. It held that the rejection was not justified, and the insurer eventually settled my claim,” he said.
The case highlights the importance of documenting an accident. “It is better to take pictures and videos of the accident site as visual proof,” said Amish Shah, a Pune-based garage owner.
In another case, New Delhi-based Dharmendra Kumar (38) said his car caught fire while he was driving. The insurer rejected the claim, calling it 'mechanical in nature'. Kumar contested this, saying it was an accidental fire caused by a short circuit. What helped Kumar was that he had immediately reported the incident to the police, the fire brigade, and the insurer. "The fire report and police diary note supported our case when the matter went to the ombudsman," he said.
Sometimes a claim can be rejected due to a basic compliance issue. Mumbai-based Bhupendra Gosar’s (62) claim, for instance, was rejected after it was found that his driving licence had expired.
There are also several misconceptions about motor insurance features that can lead to unnecessary disputes. Here are some of the key ones.
Be accurate about disclosures
When buying a policy, policyholders should provide accurate information about their previous claims, no-claim bonus (NCB), vehicle ownership, usage, modifications and other details. “Misrepresentation is one of the biggest reasons for claim rejection. Information that may seem unimportant while buying the policy can become relevant at the time of a claim,” said Narayan Rao, head – Motor Claims, Go Digit General Insurance.
Policyholders should also inform the insurer of changes during the policy period, such as a transfer of ownership, a change in vehicle usage, significant modifications, or previously provided incorrect information, Rao explained.
Zero-dep does not mean everything is covered
Under a standard motor policy, depreciation is applied to various parts, such as plastic, rubber, nylon, and metallic components, based on the vehicle's age. Zero depreciation cover reduces or eliminates depreciation deductions on eligible parts after an accident. "You may have to shell out about one-fourth of repair expenses yourself if you do not have this add-on," said Shanai Ghosh, managing director and chief executive officer, Zuno General Insurance.
But zero-dep does not mean complete coverage. “Only accident-related damage is covered, not the normal wear and tear. You cannot get a new part fitted just because you have this add-on. Policyholders should also check exclusions and the parts covered under their specific policy,” said Deepak Yohannan, insurance expert.
Consumables, engine and tyre cover are separate
Consumables such as engine oil, coolant, lubricants, brake oil, grease, nuts and bolts are generally not covered unless the policy has a consumables add-on. “Consumables covered have averaged around 10% of the overall claim amount,” said Ghosh.
Engine protection is another separate add-on. It can cover consequential engine or gearbox damage arising from specified insured events, such as water ingress or lubricating oil leakage. “In recent claims, this cover has paid around 76% of the repair amount, significantly reducing customers’ out-of-pocket expenses,” said Ghosh.
Tyres are another potential gap. Damage to a tyre alone may not be covered under the standard policy, even if it is accidental, unless the relevant tyre protection cover is purchased.
These add-ons are generally available only for vehicles within specified age limits, often up to seven or eight years, depending on the insurer and product.
Think twice before making a small claim
A small repair bill may not always justify filing a claim because it could affect NCB. “If a repair costs ₹8,000-10,000 but retaining the NCB saves ₹12,000-15,000 at renewal, paying for the repair yourself may make sense. But if the claim is ₹50,000, filing it would generally be more sensible,” said Rao. The decision ultimately depends on the claim amount versus the NCB benefit you stand to lose.
Don’t club old damage with a new claim
Policyholders sometimes try to club previous scratches and dents with a new claim. This can backfire. “Surveyors can detect previous damage. If policyholders try to include it in a new claim, it could jeopardise even a genuine, high-value claim,” said garage owner Shah.
Buying a used car? Transfer the policy
A common misconception is that an existing motor policy automatically remains fully valid when a car changes hands. According to Ghosh, while the third-party or liability component transfers automatically, the own-damage component needs to be transferred to the new owner.
“The buyer should inform the insurer, provide proof of purchase and Form 29/30, and apply for transfer,” said Ghosh. If this is not done, an own-damage claim may not be payable because insurance records will recognize the previous owner.
Know what to do after a car is stolen
For a theft claim, policyholders should act quickly. “Lodge an FIR (first information report), inform the insurer, inform the RTO (Regional Transport Office) and obtain an acknowledgement, and submit the original RC (Registration Certificate) and keys to the insurer,” said Zuno. Delays or missing documents can complicate the claim process.
Salvage value in total loss
When a vehicle is declared a total loss, the salvage still has a value. Policyholders can choose to have the salvage disposed of with assistance or, subject to the insurer’s process, take responsibility for disposing of it.
Zuno’s Ghosh said that when the customer opts for assisted disposal, the salvage buyer pays the salvage value directly to the customer, while the insurer pays the balance of the claim. Salvage value, along with the balance, will be equal to the vehicle's insured declared value.
Third-party cover does not mean you are covered for your own death
Third-party insurance is mandatory, while own-damage cover is optional. But neither should be confused with personal accident (PA) cover for the owner-driver. “Compensation for the owner-driver’s death is typically linked to PA cover, rather than the third-party or own-damage component,” said Go Digit’s Rao.
Owner-driver PA cover is mandatory unless the owner already has an eligible standalone PA policy. “The standard cover is ₹15 lakh, with the premium for a one-year cover mandated at ₹750,” said Yohannan.
In simple terms, third-party insurance covers your liability towards others, while own-damage cover pays for damage to your vehicle. Neither is a substitute for personal accident protection for the owner-driver. PA cover for passengers can generally be purchased as an additional cover.
Motor insurance is not a blanket cover for every damage to your car. Before buying or renewing a policy, understand the exclusions, add-ons and claim conditions. Keep your documents and disclosures up to date. A few minutes spent checking the fine print can prevent a much bigger surprise when you file a claim.