When making a significant purchase like a car insurance policy, you should muffle your innate bargain-seeker instincts and look beyond procuring the cheapest deal. Agreed that “cheap” does not always mean “low-quality”, but as far as insurance is concerned, a low-priced plan can offer much less coverage and expose you to a myriad of risks.
Here, we take a look at the various reasons why you should not settle for a cheap car insurance policy.
Cheap Versus Affordable Car Insurance
In the realm of auto insurance, the cost is always indicative of the extent of coverage or service that you are liable to receive from the insurer. You have to understand that there is a wide difference between cheap and affordable car insurance. “Cheap” car insurance may actually offer you less coverage, while you can receive adequate cover by selecting an “affordable” insurance plan. So, it is advisable to compare rates of insurance policies and weigh these out against the coverage offered under each plan. This facility is available at neutral financial websites and should be used before buying car insurance.
Drawbacks Of Selecting The Cheapest Car Insurance
The appeal of a low price tag is irreplaceable, but that should not deter you from finding the most suitable plan. If you do a little research you can find a policy that offers extensive coverage in a cost-effective manner. Some of the drawbacks of picking the plan with the lowest price tag are described below:
- Insufficient coverage - Some of the cheapest car insurance plans offer only third-party liability insurance coverage. This means that if you ever get involved in an accident, your insurance company will only pay for the damages suffered by the third party. You and your vehicle will not be protected under this cover. You will have to foot the bill for the repairs that your car may undergo following the accident.
- High deductibles - Some insurers offer comprehensive auto insurance plans at a low cost with the clause of high deductibles hidden in the policy wordings. Voluntary deductible is an amount that the policyholder will be expected to pay at the time of a car insurance claim. Opting for high deductibles will reduce your annual premium to a large extent. However, at the unsettling time of an accident, you will have to pay a part of the expenses. So be prepared for the same.
- Poor customer service - The insurer offering the cheapest policy may not have the best customer service. The claims support facility may not be efficient as well. So, you should read reviews from existing customers and find out about the company’s claims handling procedures and customer service.
How To Select The Best Car Insurance Policy
Here are some ways to ensure that you get the best coverage under your car insurance at an affordable cost:
- Compare insurance - Compare car insurance between providers. As indicated above, this is a crucial step in the process of identifying the best insurance plan.
- Add-on covers - Review add-on covers offered by the insurance company. Select an insurance provider that is able to offer you a wide range of useful add-on covers. This way, you can choose additional coverage suited for your specific insurance needs. For instance, the engine protect add-on cover is highly beneficial for car owners who live in areas prone to waterlogging. The engine of a car is not usually protected under a comprehensive car insurance policy. So, this add-on cover is very useful for this purpose.
- Price negotiation - Negotiate with the car insurance company on a reasonable price.
- Preserve NCB - If you are looking for renewal of your policy, use the NCB that you earned on the previous policy. This will give you a significant discount on premium.
- Claim settlement history - Check out the claim settlement ratio (CSR) of the insurance provider. A ratio above 85% indicates that the insurer has a good history of settling claims.
- Cashless garages - Ensure that the car insurance company has a wide network of cashless garages. This ensures that you can avail hassle-free claim settlement without having to pay for the damage repairs upfront.
- Cost-to-feature ratio - As indicated above, it is best to evaluate the features offered under the plan and weigh it out against the cost. Pay close attention to exclusions under the plan so as to have a clear picture of the type of claims that the insurer does not honour.
- Online policies - It is recommended that you buy car insurance online. This way, you can get discounts on premium without any compromise on the extent of coverage. Car insurance companies have significant savings when they sell insurance online. This is because there is no involvement of middlemen, resulting in savings on processing and distribution costs. The insurer, in turn, passes on a part of these savings to the customer in the form of premium discounts on online policies.
- Other discounts - Car insurance companies offer various other discounts to customers. For example, if a vehicle is installed with approved anti-theft devices, the customer can get insurance at a lower cost. Another type of discount offered by car insurance companies is the automobile association membership discount. Car insurance providers also offer discounts based on the profession of the policyholder and loyalty discounts. Check with the insurance company if you are eligible for any of these benefits to save on premium.
In conclusion, although a minimum level of car insurance is mandated by the law, it is better to stay safe with comprehensive car insurance. So, rather than focusing on “cheap”, look to buy the most “cost-effective” plan. After all, a car is one of the most expensive purchases you will make in life. Protect it with the maximum insurance cover you can afford so that it serves you well for years to come.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017