Car insurance secrets that will help you invest wisely

When you prepare to buy a new car, you would spend a lot of time researching to finalise the model of your vehicle. It is equally important to spend some time in putting together a car insurance that offers you optimum coverage.

Most car owners face the biggest dilemma when they make insurance claims. This is due to the fact that they are not clear on the clauses listed out in the policy, at the time of purchase. If you want to avoid such a situation, you need to read your policy documents carefully. In addition to that, having basic knowledge of the intricacies of car insurance will go a long way in equipping you with the information to make a sensible decision.

Here, we have listed out some of the best-kept secrets of auto insurance that can guide you in the selection of a policy.

  1. Compulsory deductible

    When you file a after an accident, the insurance provider reimburses you for the damages after deducting a certain amount of money. This amount should be paid to the garage by the policyholder, before the insurer provides his share of the claim amount. The money that the policyholder pays corresponds to the compulsory deductible, and this value is predefined by the insurer in accordance with IRDAI.

    • The car owner cannot opt out of this deductible, as it is considered to be embedded in the insurance policy.
    • It is similar to a threshold that the policyholder bears before the insurer pays up.
    • The compulsory deductible is offered by insurers to ensure that car owners do not make claims too often, and for small amounts. Hence, this is a way to encourage drivers to stay safe on the roads.
    • However, insurance providers often fix the compulsory deductible at a higher rate to ensure minimum claims. It is upto you to check the IRDA website or consult insurance experts to identify the standard compulsory deductible amount, and make a well-judged purchase.
  2. Consumable cover

    Consumables like coolants, oils and grease are not usually included under the coverage of a car insurance policy. But if you include the consumable cover in your comprehensive motor insurance, you will be reimbursed the cost of consumables after an accident.

  3. Depreciation cover

    When your car ages, it has a higher depreciation. Charges for depreciation varies from one car to another, and it is dependent on the car’s model and the insurance policy that you have selected.

    When you make an accident claim, the insurance provider pays the reimbursement amount after deducting depreciation charges. Insurance companies take into account the metal, plastic, fibreglass and every depreciable element of your car. If the depreciation corresponds to a deduction in claim amount by 40%, you will have to pay this amount from your pocket. However, you can overcome this by opting for an add-on depreciation cover for your auto insurance.

    • A depreciation cover enables you to avail 100% of reimbursement on depreciated parts of your car, at the time of a claim, i.e., you will receive repair costs of fibreglass, batteries, rubber, nylon, plastic parts, and airbags.
    • This is however, allowed for only two admissible claims in the duration of the policy.
    • This add-on cover is available only for vehicles that are less than 5 years old.
  4. No-Claim Bonus

    A No-Claim Bonus (NCB) is awarded to a policyholder for not making any claims in a policy year. This is a very useful bonus, as it amounts to a significant reduction in premium for subsequent years that remain claim-free.

    • NCB belongs to the vehicle owner, not the vehicle - It should be noted that the NCB is given to the car owner and not the vehicle. So, in case you change your car, you can transfer the accrued NCB to your new vehicle’s insurance policy. It can also be transferred from one insurance company to the other. However, it cannot be transferred from one individual to another. The only time there is an exception to this rule is when a legal heir inherits the car after the death of the policyholder who accrued the NCB.
    • NCB is for own-damage cover - The NCB is applicable only to the premium that corresponds to own-damage cover, and not to third-party liability. So, if your car insurance only includes third-party liability cover, you will not accrue any NCB.
    • Do the calculations - It is advisable to weigh out your benefits before making a claim. This implies that if your car has suffered damages that amount to a small claim value, it may be wiser to refrain from filing the claim, and bear the expenses yourself. This way, you will not lose the eligibility for NCB, and can benefit from a lower premium at renewal.
    • NCB cover - The add-on NCB cover can protect your NCB, even if you make claims! This helps in retaining your NCB percentage throughout the life of the policy.

    Keep note of these pointers and save big on your auto insurance. It is better to be prepared when you purchase a policy, so that there are no hassles at the time of a claim.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

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