name itself is an allegory, a metaphor used to describe the effectiveness of
the insurance policy.
Need for non-Deposit Car Insurance?
While at a glance this insurance appears to be a risky proposition for the insured. But a closer look at the reasons behind the adoption of this insurance justifies its existence and continued use. The fundamental requirement for the purchase of any insurance policy including a very cheap car insurance no down payment, is to safeguard one-self against potential claims raised by third parties suffering damage to property or self. It is the job of the insurer and not the insured to pay off these third-party claims after checking on the validity of the claims. Thus, insurance companies tend to indemnify their insurers from specific risks as mentioned in the policy purchased. But there might be instances where the insurance company and its insurer might have a difference of opinion regarding the:
- Nature of the claim
- The settlement amount and
- The need for making the claims in the first place.
This can lead to a discord between the insurer and the
insured since the philosophies and ideologies followed and applicable in this
aspect are different for both. Thus, the insurer will only want to limit the
expenses incurred by way of claim adjuster fees, legal fees and the actual
settled amount. These have a tendency to grow if the claim process gets
On the other hand, the insured simply wants the settlement amount to be kept as a minimum. This kind of insured are the ones who opt to buy now pay later car insurance due to the low income. If the third or injured party is not conducive to the settlement amount, the insured also has no interest in going to the courts with it or sustaining a legal case. In this instance, the insurer settles the claim with the third party but the insured refuses to acknowledge the same.
This is where a policy actually proves to be quite
successful. Incorporation of this clause into the main insurance purchased
protects the insurance company from losing out money by way of claims and
receiving nothing in return.
Insurance Policies Requiring the Clause
Almost all types of insurance policies can be appended with a clause. But it is more commonly found in those insurance schemes wherein there is always a risk of a third party raising a claim like:
- Public liability policy
- Property insurance policy
- Motor vehicle insurance policy
- General liability insurance policy
- Professional liability policy
- Salon insurance policy etc.
It would not be wrong to say that its inclusion into insurance policy clauses only helps to strengthen the policy. It also ensures that both the insured party and the concerned insurance companies are not taken advantage of.
Decoding Insurance Policy
The goal of this clause is to protect the financial
liabilities of both the insured and the insurer. There are 2 elements which are
generally associated with this clause and aid in the protection of both. They
- Firstly, this clause makes it mandatory for the Insurer to get the approval of the Insured before they even think of settling a claim.
- If the insured refuses to consent then the clause serves to limit the Insurer’s financial liability towards the amount approved for settlement by a plaintiff.
Taking the first element into consideration it can be seen
that this insurance policy ensures that both the insurer and the insured know
about the amount of settlement that a plaintiff has claimed. This in turn,
empowers them to take a call if the said claim is legitimate.
The second element attains great responsibility as it
limits the insurance companies paying capacity for settlements which the
insured feel inappropriate. Thus, it also protects insurance companies from
acquiring bad debts thereby making them financially strong.
In simple words an insurer obtaining very cheap car insurance no deposit, can legally refuse to pay for any additional money that might be required for the settlement of the claim. Even defense costs need not be paid with immediate effect from the date the consent has been withheld.
Advantage of the Clause
The biggest advantage of this insurance is the placement of an indemnification cap limit. This limit entails that all costs incurred by the insurer during the process of settlement including the defense fees etc., need to be necessarily within it. This makes for a faster claim settlement process since if the insured wants to go legal for a prolonged period of time in order to delay the settlement process, he has to do it on his money. This capping also makes out of court settlements seem more practical and hence the popular choice thereby making for an easier and effective claim settlement process.