An unpopular insurance term but very useful for policyholders, this blog explains what a knock-on contract means and how it helps policyholders.
Although there is an allowance on paper in car insurance that protects a person from damage to the car or personal injury due to the fault of a third party (called Third-Party Liability), the reality can be different. According to the Third-Party Liability Policy, the person involved must first prove to the Motor Accident Claims Tribunal that the accident was caused by the negligence of another (third party) driver. Only those involved can be compensated for the damage to the third-party car insurance company.
However, as we can see, the process can be long and tedious because it involves proving someone else’s guilt in a court of law. A person can either succeed or not. To ensure fairness to the affected party, therefore, there is a category of car insurance called knock-for-knock car insurance claim.
Knock-for-Knock Agreement in Motor Insurance
They refer to the agreement of two car insurance companies, saying that in the event of a traffic accident, each company will pay their policyholders for the damages incurred by both customers. This saves a lot of time, trouble, and sometimes even frustration among those involved in getting what they need to do.
Thanks to the cooperation between the two insurers, each of their clients can receive benefits or compensation for their losses without the need to go through a long and complicated process. However, keep in mind that knock-for-knock insurance benefits are only available if both parties involved in the accident have car insurance.
3 Requirements of a Knock-for-Knock Agreement
Here are some of the key terms of this agreement that you should know:
- The agreement is not legally binding, meaning that one of the parties involved can still apply to the court for dispute resolution if they wish. The knock-on-knock advantage only helps speed up the whole process; however, one may still choose to take the case legally.
- It is also not necessary for all insurance companies to sign a knock-on contract. So you should check with your insurer at the time of filling out the auto insurance policy.
- According to IRDAI, the permissible compensation for car damage is up to Rs. 7.5 lakh under third car insurance. However, if you choose to go for a car insurance contract, you have the right to be paid by your insurer with an amount equal to the Insured Declared Value (IDC) of your car.
Importance of a Knock-for-Knock Insurance Contract
Here are some of the benefits of this agreement for the insured and the insured:
- One of the biggest advantages of going to a knock-out agreement under your car insurance policy is that you can save a lot of time, effort, and money spent on litigation at the Tribunal. This works in favor of both the insurance company and the policy holder.
- Also, accidents can be stressful because damages are involved. Also, the exhausting effort to prove another person’s guilt in court can add to the stress. Resolving damage claims through your auto insurance policy can help ensure fairness and peace of mind for all parties involved.
- Resolving accidental damage complaints through knock-knock cooperation helps speed up the complaint resolution process. This means that you can use the money paid for and use it to repair the car instead of waiting for the initial installation, which can take a very long time.
Read more: Car Insurance Benefits and Features
What’s Not Covered Under the Knock-for-Knock Agreement?
Although knock-for-knock insurance is very useful in chasing accidental damage claims, there are some areas that do not have the benefit of this cover:
- This policy covers claims made only under the Own Damage section of a comprehensive car insurance policy. Since the claim was not made under the Third Liability Section, it means that even if the party was not at fault for the accident or the damage it caused, they can still lose to benefit from the No Claim Bonus.
- The contract pays for claims for accidents that occur within pre-defined limits. Each insurance provider specifies the geographical limits (usually the borders of India) for coverage. This means that the knock-on-knock contract cannot be used to settle any claims for accidents that occur outside India’s borders. The insurer will no longer be obliged to pay compensation in these cases.
- The contract pays the owner only if he has a car insurance policy. Does not apply to third party insurance plan.
- The premium received for accidental damage cannot exceed the IDV specified in your car insurance policy.
- This policy is only for indemnification of damages caused by motor vehicle accidents. It cannot be used for other traffic accidents, such as railways or trams.
Although knock-knock insurance is not a law but a general understanding between two insurers, it works well for the benefit of both the insured and the insured parties involved. It helps to speed up the repayment of the loan, saving a lot of time, energy and money, which can be used to repair the car quickly.
It makes sense to get the benefit of a collision insurance policy as part of your car insurance policy. Also, if you are looking for the best car insurance online, check out PayBima, which offers several options for new car insurance policies and car insurance renewals.
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