Owning a car is no longer a luxury but a necessity. But not many people realize that choosing the right car insurance policy is just as important as choosing the right car. Any damage or accident can have serious consequences for your finances if the vehicle is not adequately insured.
Since auto insurance is usually standard across all channels and insurers, there isn’t much to choose from when it comes to basic vanilla products. There are mainly two types of plans: liability insurance plans and comprehensive insurance plans.
THIRD PARTY PLANS
These are primarily intended to cover damage to third parties. If you cause a traffic accident in which someone is injured or someone’s vehicle is damaged, the third-party insurance takes care of the damage. Third-party liability insurance is mandatory under the Motor Vehicles Act. On the other hand, it does not cover damage to your own car; that remains your personal expense.
This plan is much more popular and beneficial as it covers both third-party damages and own damages. It also covers theft and damage caused by natural disasters such as earthquakes and cyclones. “A comprehensive plan is always recommended over a third party plan as it also covers your damages. New buyers should opt for a comprehensive plan as a new user is more likely to crash into their car,” says Varun Dua, Co-Founder and CEO, Coverfox, which sells auto insurance online.
Comprehensive insurance is recommended to minimize the financial burden in the event of an accident, damage from natural disasters or car theft. “With the increasing number of traffic accidents, theft and natural disasters, it makes sense to opt for a comprehensive plan to ensure complete protection and peace of mind,” said Rajiv Kumar, Head of Corporate Planning, Universal Sompo General Insurance.
The premium basic car insurance includes premium own damage & liability insurance. Third party coverage is not flexible and depends on engine displacement; Owner coverage is also firm and non-negotiable. Own claims section is responsible for a much larger portion of the premium than the above two and depends on factors such as engine size, model, claims history, place of registration and age of the car. The premium for diesel cars is 10-15 percent higher than that for petrol cars. A car owner can reduce the cost of insurance by only opting for appropriate additional coverage.
“If the vehicle owner lives in a low-lying area where rainwater accumulates, they should consider choosing engine protection coverage for engine damage from water ingress. Engine damage from water ingress is not covered by the standard own damage coverage and therefore any damage must be are borne by the insured on the engine of the vehicle. The amount to be spent on engine repairs depends on the make of the vehicle and is exorbitant,” says Kumar. Therefore, you should choose your additional coverages carefully based on your usage, as unnecessary extensions will result in a higher premium spend.
In contrast to the own claim premium, the third-party liability premium is an appraised product, the price of which is determined by the government/regulatory body. “The third party premium is billed. It is fixed and uniform for all insurance companies. The regulator determines the third party premium based on technical parameters of the vehicles and the third party claims/losses from last year,” said Amitabh Jain, Head of Underwriting and Claims, ICICI Lombard.
Some insurers also give a discount on own damage, but this discount usually depends on the city and the car type. So a Hyundai i10 might get a 45 percent discount in Delhi and 50 percent in Mumbai. The car owner has no control over these factors, but there are a few companies that offer you discounts. To qualify for a discount, for example, one can choose to become a member of the Automobile Association of India or install an anti-theft device. Customers can also receive a no-claim bonus discount ranging from 20-50 percent, depending on the number of years they have not made a claim. The premium also depends on the number and price of the additional cover and the voluntary deductible that you choose.
While add-ons increase the premium, they’re worth it, say industry experts. “It all depends on the use of the vehicle. But while one cannot doubt the usefulness of these additional covers, one has to choose wisely,” says Kumar. Add-ons cover loss of driver’s license, registration copy, keys or personal belongings, in addition to accidental hospitalization and consumables. Here are some additional coverages to consider based on your need.
- Breakdown assistance: If you regularly drive on highways and long stretches, it is a good idea to opt for Road Side Assistance (RSA) coverage. If your car breaks down on a highway or has battery problems, RSA coverage kicks in. Under this, the insurer offers various types of assistance, including towing services, on-site battery jump-start assistance, tire replacement, additional fuel and, in some cases, reimbursement of money you spend staying at a nearby hotel while your vehicle is being repaired. repaired . It also offers an alternative vehicle, up to a certain distance, or a fixed amount.
- Back to invoice (RTI): In the event of a total loss, RTI will reimburse the difference between the road price and the IDV (insured declared value). IDV, or simply the value of the car, is determined while buying the insurance. “Make sure you choose the correct value of the car as that is the amount you will get in the event of a total loss or theft. Also, don’t give out wrong information when buying the policy as it could affect claims settlement,” says Dua from Coverfox. In order to get more discounts on premiums, vehicle owners sometimes underestimate the IDV of the vehicle, which ideally should correspond to the current market value of the vehicle, because in case of total loss, the owner is reimbursed an amount that is less than the real value of the vehicle. the vehicle. Returning to RTI, in case of theft or total loss, RTI may prove to be a savior after the vehicle is declared unfit for further repairs and use. The difference in premium between a simple comprehensive policy and a policy with the RTI coverage is about 30-40 percent. “With recent incidents of natural disasters and vehicle theft on a large scale, customers are opting for RTI coverage to protect their purchase,” said Kumar.
- Bonus protector without claim: It protects your NCB (no claim bonus) earned on the previous policy, even in the event of a claim. When renewing the policy, one must protect one’s NCB benefits in order to benefit from discounts on own claims premium for a claim-free year the following year. Tiny damages must be personally funded and not claimed in order to receive the NCB benefit.
- Depreciation Insurance: Zero depreciation allowance can save the amount deducted in case of partial loss of replaced parts. This costs between 15 and 20 percent of the standard premium and is recommended for all cars. It is available for cars up to five years old. No Depreciation provides full coverage without considering depreciation on auto parts and saves you a lot of money. If your car is damaged after a major collision, you will be reimbursed the full costs of the insurer.
Channel of distributors: Each distribution channel has its own pros and cons, but digitally savvy customers seem to prefer online insurance for lower premium and operational benefits. “The best premium rates are available online, and one can easily see a 20-25 percent premium difference between the price quoted by agents and the online quote, although negotiation can bring the agent’s quote close to the online one. having an agent has an advantage in that the agent can help you explain jargon, but if one is familiar with the basic language used in the insurance industry, buying online is always advisable,” says Dua. Online purchases make it easy in terms of policy management, quick and easy renewal, timely reminders, etc. Online policies are not only cheaper, they also help save time as you don’t have to go to the insurance company or rely on the agent for all policy-related matters.
Customers also prefer to buy insurance from car dealers because they have affiliations with different insurance companies and the dealer provides adequate coverage. They also offer special offers exclusively to their customers by negotiating with the insurers.