Shopping for a car insurance policy is not an easy affair. Selecting the most suitable cover involves understanding the policy benefits, reading the policy documentation and comparing motor insurance quotes from multiple insurance providers.
Here we have consolidated a list of best practises that you can follow to get optimum benefits from your policy:
- Understand the different types of car insurances
Car insurance plans provided by insurers in India can be mainly divided into two types:
- Third-party car insurance - This insurance policy provides you protection against damages caused to a third-party when you are at fault.
- Comprehensive car insurance policy - This type of insurance covers damages to your car from natural calamities and theft, and offers protection from personal accidents and legal liability to a third-party.
- Identify the factors that affect car insurance premium
Although most car insurance policies look very similar on the outside, they will have widely varying clauses that need to be understood well, before you sign on the dotted line. You also need to understand the factors that impact your insurance premium. These factors are usually influenced by risks that insurers assess, and can be segregated into the following categories:
- Risk related to the car - The premium that a policyholder pays depends on the brand of the car, the engine displacement, type of fuel, etc. The age of the car and its IDV are also influential in deciding the premium.
- Place where the vehicle was registered - If the car owner got the vehicle registered in an urban area, he is liable to pay higher premiums. This is because such regions are more susceptible to thefts, accidents and vandalism.
- The car owner’s driving history - If a driver has an accident-free history, he will be required to pay lesser premium for the policy than someone with a poor accident record.
- The credit record of the car owner - Maintaining a good credit history is useful for availing a cheaper car insurance.
- Determine the ways in which car insurance costs can be minimised
Car insurance premiums can be reduced to a great extent by opting for deductibles, and maintaining a claim-free record.
- Deductibles - Car insurance providers allow you to select deductibles and other add-on coverages. The details of deductibles in your insurance decides the premium that you will be required to pay.
- No-Claim Bonus (NCB) - A No-Claim Bonus is given to a policyholder by an insurer for not making claims in a policy year. The NCB is a very valuable factor, as it can amount to a discount of around 20-50% on premium, when you consistently maintain a claim-free record.
- Opt for add-on covers
There are certain add-on covers that you can opt for in order to enhance the benefits of your car insurance:
- Zero depreciation cover - Also referred to as Nil Depreciation or Bumper to Bumper Cover, this insurance does not consider the depreciation of car parts. In a normal comprehensive car insurance policy without this add-on, the insurance provider reimburses only the value of car parts after depreciation. This add-on provides you the benefit of availing the claim amount without considering depreciation.
- Personal accident cover - This cover offers reimbursement in the event of death or serious injuries sustained by the policyholder, after an accident.
- Add-on insurance is also available to include coverage for roadside assistance, consequential engine damage, loss of personal belongings, and key replacement. However, these covers are not available for vehicles more than 5 years old.
- Ensure appropriate car valuation is done
The Insured Declared Value (IDV) of a car is considered as its agreed value between the insurer and the policyholder if a total loss (TL) or a constructive total loss (CTL) occurs. There have been instances where IDVs have been declared to be much lower than the actual value, in an attempt to reduce premiums. But this could turn out to be highly unfavourable for the policyholder, as he would have to bear a substantial loss at the time of a claim. Hence, a small amount of savings on the premium may not always provide you optimum long-term benefits.
In addition to the pointers above, it is inevitable that you do a good amount of research online to identify the insurance plan that best suits your needs. Based on your research, you should make an informed decision on a suitable car insurance policy.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017