Choosing the Right Car Insurance

Choosing the Right Car Insurance

Getting an insurance for your car is a real puzzle if you have not understood as how to choose the right coverage for the car. You will need to get the right insurance policy for the car, post going through the finer details which is where a real insurance policy resides. Comparing quotes, checking the finer details on exclusions, add ons etc will help you in deciding the right policy.

Now, let’s see a list of things which you would probably have to go through to ensure you get the best out of your policy:-

Understand the types of Vehicle Insurance

Broadly there are two categories of General Insurance Plans offered by the providers in India

A Third Party Liability Insurance, which is a mandatory requirement for driving vehicles in public roads in India, covering damage to property, accidental death and injury to a third party

A Comprehensive Plan, which covers own damage (which includes theft or damage caused by unforeseen disasters like earthquake, cyclones or explosions etc) and a third party liability. This happens to be the most preferred option as it has multiple protection features.

Understand the factors influencing the Vehicle Insurance Premiums

Generally the premiums for vehicle insurance are calculated based on the risks that the Insurance Company is underwriting, which are as follows:-

Risk factors of the Vehicle you own, which is based on the make of the vehicle, it’s fuel type and the cubic capacity etc. As an example, diesel vehicles attract a high premium when compared to petrol vehicles, Sports Utility Vehicles and Commercial vehicles for which insurance companies have experienced higher claims attract higher premiums. The age of the vehicle and the depreciation while you renew your insurance policy also determines the premium substantially based on the Insured declared value (IDV). The IDV is based on the ex-showroom price for vehicles less than five years old and based on the market value for vehicles older than five years.

Risk factors of the location where your vehicle is operating is another critical parameter for calculating the premiums. The vehicles registered in Urban areas or densely populated areas attract higher premiums. The theft index of the location based on government records also has impact on the premiums of vehicles registered in such areas.

Other critical factors affecting the premium for your vehicle are the History of Claims and the profile of the driver. The Renewal Insurance Premiums can be higher for a vehicle for which there are claims made compared to vehicles for which no claims have been made previously. Companies offer No Claim Bonuses based on this history which reduces the premium. The age and profession of the driver are also considered for calculating the premiums and in the case of the commercial vehicles where more than a driver operating the same vehicle, there is a loading in the premiums.

How can you reduce the cost of your vehicle insurance ?

By removing the cost of voluntary deductibles (excesses) which is the amount payable by the insurance providers over and above the base claim. If some of the small claims for smaller damages can be borne by you there could be a possible reduction of around 25–30 % in the insurance premiums

A reduction in premiums by around five percent every year is possible when you don’t claim insurance on your vehicle (No Claim Bonus). Companies give this benefit and also use this as a record of good driving habits every year. This is transferable also in case if you sell of your car and buy a new one, which reduces the insurance premium for your new car.

Reduction in premiums for certain vehicle models are permitted to the range of 2–3 %, which come out withbuilt in enhanced security systems, approved by the Automotive Research Association of India, which reduces the probability of theft of such vehicles.

There are several add ons offered by the Insurance Companies, which increases the premium like:-

Nil-Depreciation Insurance which covers for even the rubber and plastic parts (for which otherwise only fifty percent is paid). Even though this saves premium, with most of the vehicles having a significant portion of such parts, there could be a financial impact when a claim arises.

A personnel cover (including personal accident coverage for the owner of the car) which is included in the comprehensive plan, though useful can increase the premium.

Probable misses to be taken care when choosing a cover

It is always advisable to go for a higher Insured declared value (IDV), even though it means that you have to pay a slightly higher premium. This will reduce a loss of benefits in case of an accident and claim.

It’s a necessity that you need to keep a watch on the expiry of your vehicle insurance. Even though the insurance provider usually gives a grace period of a week, post that you are running the risk of driving a car without insurance and which may lead to lose of benefits like lower premiums or discounts.