Having car insurance is mandatory by law and it’s not the only reason why car owners in the country need to have it. Car insurance, like any other sort of insurance policies (health insurance, life insurance, home insurance), ensures that the policyholder is financially protected in the worst situations. The benefit of car insurance is that it offers coverage if the policyholder’s vehicle is damaged following an accident. Apart from accidents, a car insurance policy offers coverage if the policyholder’s car is damaged following a natural calamity such as a flood, landslide, earthquake, or a strike, riot, etc. In addition, a car insurance policy offers coverage if the car catches fire.
If a policyholder’s car catches fire, he/she needs to raise a claim with the insurer and depending on the Insured Declared Value (IDV) or the market value of the vehicle, he/she will be compensated for the damages caused to the car following the fire. That said, we’ve listed out the steps that policyholders need to take if their car catches fire and what they need to know to receive the claim amount or compensation.
The type of car insurance policy one needs for a fire claim
There are just two types of car insurance policies that car owners can choose from – a third-party liability car insurance policy or a comprehensive car insurance policy. The coverage of a third-party car insurance policy is limited to cover the cost of damage of the property of the third party, whereas, a comprehensive car insurance policy comes with own damage cover for the property of the policyholder and the third-party liability cover. In addition, a comprehensive car insurance policy offers coverage for damage caused to the car following a natural calamity, if the car is stolen, or if the car catches fire.
Only if the car owner has a comprehensive car insurance policy can he/she raise a claim to cover damages caused to the vehicle following a fire. If the policyholder has a standalone third-party liability cover, he/she cannot raise a fire claim and they will have to cover the expenses to repair the vehicle from their own pocket.
What needs to be done if the car catches fire
If the car catches following an electrical or mechanical breakdown, or if it is set on fire during a strike or a riot, the policyholder has to immediately inform the car insurer. To support his/her claim, the policyholder should take photographic or video evidence. Once the claim is raised, the insurer will contact the police station to grant an FIR or the policyholder might have to get this done and submit the FIR to the insurer.
The insurer will then assess the losses, and if the damage caused to the car is more than 75% of the Insured Declared Value of the car, then the insurer will deem the car as a total loss. The insurer will investigate the cause of the fire and if it was consequential (the fault of the policyholder) or an electrical malfunctioning due to recent modifications done by the car owner, then the claim will be rejected.
If important documents of the car were burnt as well, the insurer will request the police station to file an FIR for the policyholder to apply for duplicate documents. The policyholder will have to then take the FIR and apply for duplicate papers. However, the process of processing the claim amount will not be stalled by the insurer during this time.
If the car is on a loan and is deemed as a total loss, the financier has to be intimidated as well. In the case of a total loss, the claim amount will be sent straight to the financier of the car, and the loan will be closed.
If the cause of the fire was non-consequential, the policyholder will receive a claim amount that is equivalent to the Insured Declared Value (IDV) of the car. This basically depends on the age of the car and the depreciation factor. If the policyholder has a zero-depreciation cover or a return to invoice cover, then in the case of a total loss, he/she will receive the full claim amount from the insurer.
Financial Analyst at Farmer’s Insurance with over 25 years of experience in the finance industry