Precious is the moment when a two wheeler showroom dealer is finalising on the discounted price of the jazzy two wheeler you have chosen! You are looking for as much reduction as possible in the two wheeler’s price tag and you think you have built a rapport with the two wheeler dealer in an attempt to do so. The dealer is all smiles and convinces you to believe that he is doing his best to carve out an attractive deal. At this point, you are most likely to be offered free insurance by the automobile dealer. Although to your ears, it may seem it has come for free, however it is important to grasp that the premium being offered in this case is non-discounted.
Free Insurance from Dealer – a Myth
Automobile dealers bundle insurance policies with the sales package being offered to customers. So instead of offering a straight cash discount, they provide free insurance. Be very careful before opting for this enticing deal as most of the times the insurance policies being offered do not provide a wholesome coverage. A two wheeler insurance policy can never be free, the dealer just offers you a non-discounted premium, which is displayed as a free component against your total bill amount. Usually, it is higher than what you would have paid if you had purchased insurance yourself. Also, when car dealers say free, it only means for a year, you will have to pay the premium from the next year onwards.
Deal between Dealers and Two Wheeler Insurance Companies
Two Wheeler dealers happily serve you free insurance on a platter as they already have a deal with their in-house insurance company or an external insurance company. The insurance company usually pays a heavy commission to the dealer for the premium. Sometimes, the dealers do not even tell two-wheeler buyers that the NCB (No-claim bonus) from their previous insurance company can simply be transferred to their brand new car, as they will lose out on their commission.
Things to Remember
- According to insurance advisors, two-wheeler buyers should opt for cash discounts as ‘free’ insurance covers may have some hidden strings attached, which could cost them later and not prove beneficial. For instance, during renewal, buyers may face issues with the current regulations pertaining to policy tenure.
- Two-Wheeler buyers can always research on in the market and compare it with the one being offered by the dealer. Some genuine dealers revise their deals when you tell them about a cheaper deal available outside.
- Online comparisons can also be made in order to zero in on the best insurance policy with affordable premiums, comprehensive coverage and no hidden charges. Websites like BankBazaar offer loan comparisons which make it easier for motor buyers to make the right decision.
- Insured Declared Value (IDV): According to the IDV concept, motor buyers can declare your motor’s value as per choice. While insurance companies value brand new cars at ex-showroom prices, older vehicles are valued based on a fixed depreciation schedule. You can bring down your premium up to 15% by declaring IDV within a certain range. Lower IDV will allow you to avail the advantage of a lower premium. However, this is not a favourable method as you may suffer a loss at the time of a claim.
- Voluntary Deductibles: Voluntary deductible is a portion of the claim amount in an insurance that needs to be paid by the motor buyer. Buyers who opt for deductibles tend to get their premiums lowered by dealers. So the larger deductible you choose, the lower premium you will have to pay.
- Simpler two wheeler choices cost lower premiums than the jazzier or sportier versions as they are more theft- and accident-prone. However, this is just for buyers to be aware and should not be the main deciding factor.
Remember, do not get carried away by the term ‘free’ insurance from your two wheeler dealer and make it a significant parameter while choosing the two-wheeler you wish to purchase.