Learn About Insurance Policies

What Is Insurance?

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.

How Insurance Works

There is a multitude of different types of insurance policies available, and virtually any individual or business can find an insurance company willing to insure them—for a price. The most common types of personal insurance policies are auto, health, homeowners, and life. Most individuals in the United States have at least one of these types of insurance, and car insurance is required by law.

Insurance Policy Components

When choosing a policy, it is important to understand how insurance works.

A firm understanding of these concepts goes a long way in helping you choose the policy that best suits your needs. For instance, whole life insurance may or may not be the right type of life insurance for you. There are three components of any type of insurance (premium, policy limit, and deductible) that are crucial.


A policy’s premium is its price, typically expressed as a monthly cost. The premium is determined by the insurer based on your or your business’s risk profile, which may include creditworthiness.

For example, if you own several expensive automobiles and have a history of reckless driving, you will likely pay more for an auto policy than someone with a single mid-range sedan and a perfect driving record. However, different insurers may charge different premiums for similar policies. So finding the price that is right for you requires some legwork.3

Policy Limit

The policy limit is the maximum amount an insurer will pay under a policy for a covered loss. Maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum.

Typically, higher limits carry higher premiums. For a general life insurance policy, the maximum amount the insurer will pay is referred to as the face value, which is the amount paid to a beneficiary upon the death of the insured.


The deductible is a specific amount the policy-holder must pay out-of-pocket before the insurer pays a claim. Deductibles serve as deterrents to large volumes of small and insignificant claims.

Deductibles can apply per-policy or per-claim depending on the insurer and the type of policy. Policies with very high deductibles are typically less expensive because the high out-of-pocket expense generally results in fewer small claims.

Special Considerations

With regard to health insurance, people who have chronic health issues or need regular medical attention should look for policies with lower deductibles.

Though the annual premium is higher than a comparable policy with a higher deductible, less expensive access to medical care throughout the year may be worth the trade-off.

What Does Commercial Auto Insurance Mean?

Commercial auto insurance is a policy for vehicles used for business rather than for personal use. It may cover trucks used by companies, a fleet of taxicabs, or even a car usually driven for a business purpose. This insurance is more expensive than the standard car insurance.

It is also known as a business automobile policy.

How Does the NCB Protector Work? 

  • The NCB Protector add-on cover’s the insured’s accrued no claim bonus
  • The NCB Protector add-on will ensure that the insured’s no claim bonus stays intact for the first two claims made during the year. This will be in addition to the claim amount reimbursed
  • In case, the insured is at fault he has to forgo his no claim bonus

The NCB protector is recommended for those who live in accident-prone areas. It should also be bought by people who tend to lend their cars to others to drive. 

Roadside Assistance Cover 

This is an add-on cover for situations where the insured is stranded in the middle of a highway with no help in hand. If a customer buys road assistance cover, all he needs to do is make a phone call. The cover will ensure that he gets emergency services like medical help, towing, battery jumpstart, arrangement for fuel, minor repairing, alternative transport/ accommodation, etc. 

Invoice Protection 

The invoice protection cover will ensure that the insured’s claim is settled in a way that he recovers the entire amount of loss (the on-road price of the car at the time of purchase) that he incurred from losing his vehicle. 

The invoice protection add-on bridges the gap between the invoice value of the vehicle and its Insured Declared Value. The IDV represents the cost of the car after depreciation has been deducted from the original sale price of the vehicle. 

However, it is important to note that invoice protection cover is not available for cars older than three years. There may also be variation in the clause from company to company. 

Zero Depreciation 

The zero depreciation add-on helps the insured recover the costs for the repair/replacement of the depreciated parts of the vehicle. This is a very popular add-on cover especially for vehicles that ply within the city and face a lot of bumper to bumper traffic. The cover will ensure that the insured recovers the full costs of the parts without factoring in depreciation. 

With Zero depreciation, the insured recovers the costs for the repair/replacement of the depreciated parts of the vehicle. 

This add-on is best to buy if the vehicle is very expensive and the replacement of its parts comes at a very high price. This cover is also only available to vehicles that are not more than five years old. 

Consumables Cover 

There are certain parts of a vehicle that are known as consumables. These parts are: 

  • Bolts.
  • Screws.
  • Washers.
  • Brake fluid.

Regular bus insurance or taxi insurance or any other commercial vehicle insurance cover might not cover consumable parts. This type of cover is only used by high-end luxury vehicles. Moreover, the cover is not available for older vehicles. 

Accessories Cover 

This is a common add-on for vehicles. The costly vehicle accessories must be covered against theft and damage due to untoward events. 

Accessories are classified as electrical and non-electrical. Here are a list of few vehicle accessories: 

  • Curtains.

  • GPS Station Announcer.
  • Door grab handle for cargo trailer.
  • Laminated windscreen.
  • Bus Flooring.
  • Waterproof front view camera for the bus.

It is interesting to note that, IFFCO Tokio’s roadside assistance program is part of its comprehensive policy and one of its key benefits. It is not an add-on cover. 

The features of IFFCO Tokio roadside assistance cover includes: 

  • The insured gets ‘on-site’ minor repairs.
  • The insured gets critical services like fuel delivery, emptying of the fuel tank and jumpstarting the battery.[Text Wrapping Break] 
  • Assistance to transport the insured vehicle and relay urgent messages.

  • Flat tire support and assistance if the key is jammed. 
  • A dedicated team of customer care executives to answer all car insurance-related queries.

Coming to other add-on coverage provided by top commercial vehicle insurance company, IFFCO Tokio, it offers three kinds of add-on covers: 

  • Depreciation Cover.
  • Third-Party Cover.

  • Personal Accident Cover.

Let us briefly look at their features: 

Depreciation cover: If an insured buy this cover, depreciation will be waived off on plastic or metal parts in case of partial loss or claim. 

Third-Party Cover: 

  • The policy provides protection against Third Party Liability in case of injury or death of a third party.

  • The policy covers the expenses towards any medical and legal accountability the insured might have.
  • The policy covers the cost of damage towards third party property.
  • The policy allows the insured a cover-up to INR 7.5 lacs.
  • The policy is applicable while mounting and dismounting the car.

Personal Accident Cover 

  • The Personal accident cover offers coverage up to Rs 2 lacs for individual owner-cum driver.
  • The policy is applicable for any damage or loss that may occur while mounting and dismounting the car.