A not-so-popular insurance term but very useful for policyholders, this blog details the meaning of the knock-for-knock agreement and how it helps the insured.
While there does exist a provision on paper in motor insurance that protects a person against damage caused to vehicle or self due to the fault of a third-party (known as Third-Party Liability), the reality can be somewhat different. According to the Third-Party Liability Policy, the person affected must prove first to the Motor Accident Claims Tribunal that the accident was caused by the negligence of another driver (third-party). Only then can the affected be compensated for the damage by the car insurance company of the third-party.
However, as can be seen, this process can be extremely long and tedious because it involves proving the fault of another person in a court of law. One may or may not succeed in doing so. To ensure fairness to the affected party, therefore, there is a provision in motor insurance called the knock-for-knock car insurance claim.
Knock-for-Knock Agreement in Motor Insurance
It simply refers to an agreement between two car insurance companies, stating that in case of a road accident, each company would compensate their respective policyholders for the damages caused under the own-damage cover benefit held by both the customers. This saves a lot of time, hassle, sometimes even disappointment among either affected party in getting their fair due.
Due to the mutual agreement between the two insurers, each of their customers can then receive the benefit or compensation for their damages without the need to undergo a long and cumbersome legal procedure. However, note that this benefit of knock-for-knock insurance is only available if both the parties involved in the accident hold a comprehensive car insurance policy.
3 Important Features of the Knock-for-Knock Agreement
Here are some of the important features of this agreement that you should know:
- The agreement is not mandated by the law, meaning that either of the affected parties can still apply to a court of law for dispute-settlement if they so wish. The knock-for-knock benefit only helps expedite the entire process; however, one can still choose to take up the case legally.
- It is also not obligatory for all insurance companies to sign the knock-for-knock agreement. You will therefore need to check with your respective insurer at the time of filing a car insurance claim.
- As per the IRDAI, the maximum compensation permissible for motor damages is capped at Rs. 7.5 lakh under the third-party car insurance policy. However, if you choose to go for the knock-for-knock car insurance agreement, you are entitled to be compensated by your insurer by an amount that is equal to the Insured Declared Value (IDC) of your car.
Importance of Knock-for-Knock Insurance Dispute Agreement
Here are some of the benefits of this agreement both for the insurer and the insured:
- One of the major advantages of going in for the knock-for-knock agreement under your comprehensive car insurance plan is that it can help save a lot of time, effort, and money otherwise spent in legal cases at the Tribunal. This works in favor of both the insurance company and the policyholders.
- Also, accident cases can be quite stressful too since damage is involved. Moreover, the tedious attempt to prove another person’s fault in a court of law can add to more stress. Settling damage claims through the own damage component of your car insurance plan can help ensure fairness and peace of mind to both the involved parties.
- Settling accidental-damage claims through the knock-for-knock agreement helps speed up the claim-settlement process. This means that you can use the compensated amount and use it for car repairs rather than waiting for the settlement first, which could take a very long time.
Read More: Car Insurance Policy Benefits and Features
What is Not Covered Under the Knock-for-Knock Agreement?
Although knock-for-knock insurance is extremely useful in expediting accidental-damage claim settlements, there are certain areas that are excluded from this cover benefit:
- The agreement settles claims made only under the Own Damage component of the comprehensive car insurance policy. Since the claim is not filed under the Third-Party Liability Section, it means that even if a party was not at fault for the accident or the damage caused, they would still lose to benefit from the No Claim Bonus.
- The agreement compensates claims made only for accidents that take place within a predefined geographical boundary. Each insurer would define a set geographical limit (usually India’s border) for the sake of convenience. This means that the knock-for-knock agreement cannot be used to settle any claims for accidents that happen outside of India’s boundary. The insurer would also not be obligated to pay any compensation in these cases.
- The agreement compensates the policyholder only if they have a comprehensive car insurance policy. It does not work for the base third-party insurance plan.
- The maximum compensation received for accidental damage cannot exceed the IDV stated in your car insurance policy.
- The agreement is only for claim-settlement for damages caused due to car accidents. It cannot be applied to any other motor vehicle accidents, such as railways or trams.
Even though knock-for-knock insurance is not law-mandated but more of an understanding between two insurers, it works really well in the favor of both the insurer and the insured parties involved in the claim. It is really helpful in expediting the claim-settlement process, saving an immense amount of time, energy and money, which can then be used toward faster repairs of the vehicle.
It only makes sense then to avail the benefits of knock-for-knock insurance agreement as part of your comprehensive car insurance policy. Also, if you’re looking for the best car insurance online, do check out PayBima, which offers a variety of options both for fresh issuance of motor insurance policies as well as for car insurance renewal.
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