Buying a car insurance? While there are many who would pitch you to buy this insurance or there is an offer for that policy, we always feel insecure while buying it. Most of the time we don't really understand whats going on with our car insurance policy. Well, that should not be the case, atleast not anymore.
Here are tips to shed some light on this black box.
Type of Vehicle Insurance:
- Third party liability insurance (TP): Compulsory requirement for all vehicles plying on public roads in India. This covers damage to car, accidental death and injury to a third party (any one other than you and your insurer is called a third party).
- Own Damage Plan (OD): It is usually a preferred option by many buyers as it covers both "self damage" and "third party liability ". It also covers theft or damage caused by unforeseen disasters like cyclone, earthquake, fire explosion etc.
Third party insurance is mandatory as per law. Own damage is not.
Factors that affect premiums of vehicle insurance:
Based on the risks insurance companies will be underwriting, these can be grouped under four categories -
- Vehicle related: Make, fuel type and cubic capacity etc. are few parameters which determines the premium. Some vehicles like SUV and commercial vehicles often need higher premium payouts as insurance firm gets large number of claims on such vehicles. Generally diesel vehicles have 10-15% higher premium than petrol cars.
- Location related: This depends on the area of registration. Usually premiums are high if you live in urban area, near highways or densely populated area. If theft is high in the area where you live then the premiums go up.
- Claims history related: If you've already made a claim for your vehicle insurance then premium can go up the following year.
- Driver related: Some insurance companies also consider age and profession of the driver is taken into account. If there are multiple drivers then the premium goes up
Tips to reduce cost of your vehicle insurance premium
Deductibles or excesses are the amounts over and above which a claim is payable by insurance provider. Here is how a deductible can save your premium if your have a good driving/ maintenance record. If you are willing to settle petty claims for small damages from your pocket voluntarily, then the cost of premium for vehicle insurance can be reduced approximately by thirty per cent.
No claim bonus
You can reduce the premium payout by nearly fifty per cent every year, if you don't claim insurance on your vehicle. Insurance companies give the benefit of no claim bonus as record of your good driving year after year. If you sell your vehicle, this no-claim bonus can be transferred to your new insurance policy for the new vehicle and avail lower premium payout. Read more on benefits of 'No Claim Bonus' here
Discount for security features
Few cars come with enhanced security systems which are built-in such as anti-theft alarms and immobilizers. There is low probability of theft of such cars. These cars can be insured for lower premium. Automotive Research Association of India (ARAI) approved devices will attract a 2.5 per cent discount on your premium.
Add-ons that increase the premium but are useful
A nil depreciation (zero depreciation) policy covers for complete claim for rubber and plastic parts.
Generally an insurance company will pay only for fifty per cent of value for these parts that are subjected to wear and tear.
With most cars having features with plastic and rubber parts it is advisable to go for nil depreciation policy, although the premium would be increased. In case of a claim it can knock a lot off amount in a repair bill.
Personnel Accidental cover
A normal comprehensive insurance cover will include personal accident coverage for the owner of car. For a small fee, additional riders who possess a valid driving license and are using the car can also be covered. By default, most companies include this cover in their comprehensive insurance policies.
Key areas where you may go wrong when choosing a cover
Value of the car
In order buy a policy with a lower premium, people often reduce the insured declared value (IDV) of the car. Read more on pros and cons of how people reduce their IDV just to shave off some premium. But in case of an accident the car will be treated as total write off. Avoid such practice as the benefit you get for the premium you save is not adequate. Always try and choose a policy that offers you the maximum IDV on your vehicle, even if it means paying a slightly higher premium.
Choosing a lower IDV for your car to save on premium is penny wise and pound foolish. Avoid doing that. Lapse of Policy
In case of lapse of policy lapse your insurance provider may give a grace period of usually a week. Post this period you run the risk of driving a car without insurance. You will also stand to lose out on benefits like lower premiums or no claim bonus discount.
Chat with Arvi, our virtual insurance assistant to make the smartest and fastest insurance decisions.