Most people buy car insurance after the purchase of the car itself. This is a big mistake that car buyers make inadvertently. This could, in fact, cost them more money than they actually budgeted. It is best to shop for auto insurance once you have an overall idea of the type of car you will be buying.
The Motor Vehicles Act, 1988, makes it mandatory for all cars to have motor insurance. In this article, we have put together some essential tips to help you get hold of the most appropriate car insurance policy for your needs.
Step 1 - Understand The Different Types Of Coverage In Car Insurance
In India, car insurance is available in two coverage options:
- Third-party liability insurance - This insurance plan offers protection from legal liabilities that arise out of accidental injuries, death, or property damage of a third party. The plan does not protect the insured car or its owner/driver.
- Comprehensive insurance - This insurance plan includes the following coverage:
- Own-damage cover - This protects the insured vehicle from damages due to natural calamities, man-made disasters, and accidents. Theft of the insured vehicle is also offered coverage. Damages to the car while in transit is covered under the insurance as well.
- Third-party liability insurance - This coverage is similar to that explained above for the standalone third-party liability insurance plan.
- Personal Accident cover - The comprehensive plan protects the owner-driver of the insured vehicle from injuries or death in an accident. However, this cover is not available for the named passengers in the vehicle.
Apart from the above, the coverage under a comprehensive car insurance policy can be extended by opting for add-on covers that safeguard the vehicle against specific risks. The car owner will have to buy add-on covers separately by paying extra premium.
It is evident that the comprehensive car insurance plan offers extensive coverage to the policyholder. Hence, if you are a new driver, it makes sense to opt for this policy.
Step 2 - Understand Your Insurance Requirements
How much car insurance coverage you need depends on a host of factors. This includes the amount you owe to the car financer, the worth of your asset, the presence of dependents in your life, and the amount of money you can afford to bear at the unsettling time of an accident. Bear in mind that all car owners will have to be in possession of an auto insurance policy with third-party liability insurance cover. You should think about buying a comprehensive car insurance policy if you have financed the car or if you cannot easily replace it.
Take into consideration your budget and decide on appropriate add-on insurance coverage. For instance, if you live in an area prone to flooding, you should ideally buy an engine protect add-on cover to safeguard your vehicle’s engine. However, if you are on a tight budget, you can forgo the thought of buying this rider and park your car in an elevated or well-protected area instead.
Step 3 - Comparison Shop
Irrespective of the type of insurance you are buying, it is essential to compare plans online. This facility is offered at several financial websites, free of extra charges. Once you get the estimated costs for different car insurance products, you can weigh out the cost with the coverage offered and decide on the most economical option. You should also consider the reputation of the insurer and its customer service. Look for an insurance company that has a robust incurred claims ratio and a great claim payment history.
Step 4 - Understand The Coverage Of The Policy You Buy
The insurance policy documentation may be filled with legal jargons that may not make much sense to a first-time insurance buyer. But you should read the policy documents and get all your queries clarified with the insurance company. Pay close attention to the exclusions and understand the conditions stated as this will be beneficial to you at the time of a claim.
Step 5 - Check For Bundling Discounts
In case you have purchased other insurance products (health insurance, home insurance, etc.) from an insurance company, you may receive bundling or loyalty discounts on car insurance if you buy it from the same insurer. Check if you are eligible for the same.
Step 6 - Assess Your Insurance Requirements Regularly
As you progress through life, your insurance needs may vary. So, you should evaluate your insurance needs periodically and update the coverage you already have. This is applicable to all types of insurance products. On the subject of car insurance, you may need to buy a bigger car when your family extends beyond you and your spouse. Similarly, when you decide to become self-employed, you may want to cut down on your car insurance coverage for a specific period of time. Increase or decrease in income may also lead to changing insurance needs. In order to have the best possible coverage, it is necessary to review your insurance needs regularly and alter the coverage accordingly.
Step 7 - Do Not Let Your Insurance Lapse
It is illegal to drive without an insurance policy. Hence it is important to ensure that there is no break in your auto insurance coverage. Some insurers may also refuse to insure your vehicle after a break in insurance. So, renew your car insurance policy on time and stay safe on the roads.
There are several factors that affect your auto insurance rates. This includes the area of registration of the vehicle, your age and gender, your marital status, the purpose of the car, and the make and model of the vehicle. So, the cost of your insurance policy may not be the same as that of your friend’s. Keep this in mind when buying car insurance.
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