Your Comprehensive Guide to Car Insurance Policy Purchases

If you are smart enough at choosing the right car for you, then buying car insurance shall not be a riddle for you. A persistent car insurance salesman will never leave your door if your car is less than five years old. You need to pick insurance after going through the fine prints of the policy. Compare insurance quotes online to pick out the policy that is not only affordable but also comprehensive in terms of coverage, as it will automatically repay you in multiple ways.

The following points will help you to choose the best motor insurance policy –

Types of Vehicle Insurance

Plans offered by general insurance providers can be classified as –

1. Third-party Liability Insurance – Third party liability insurance is a policy, which provides coverage for any damages to property, injuries to one or more persons due to an accident. As per Motor Vehicle Act, 1961, 3rd party car insurance is a must for all vehicles plying on the roads in India.
2. Comprehensive Insurance Policy – A comprehensive motor insurance policy covers both ‘own damage’ and third-party legal liability of any sort. This plan also covers the loss or theft of the insured car or any damages due to natural hazards subject to the policy terms.

 Factors Affecting the Premium for Car Insurance

There are certain factors that affect the car insurance premium. These factors can be classified into four categories:

1. Vehicle-related risks – The car insurance is based on a few parameters, such as make, model, fuel type, cubic capacity and more. Diesel cars have 10 to 15 percent higher premiums than petrol cars. The payment of the premium is also dependent on the age of the car at the time of renewal and the depreciation value. For cars more than five years old, the insured declared value (IDV) is based on their present market value. On the other hand, IDV of a car less than five years old is determined by the time (in years) it has been in use and the ex-showroom price.
2. Location-related risks – Location-related risks are dependent on the area of registration. If you live in an urban area, nearby a national highway, or in a populous area, then you have to pay comparatively high premium rates. If theft rate is high in your area, then also you will have to pay high premium rates.
3. Claims History-related Risks – If you have already made one or more claims during a policy year, then you might not be able to make claims anymore. Also, your will have to pay a higher premium at the time of policy renewal.
4. Driver-related Risks – The premium rate is also dependant on the age and profession of the driver. If there are multiple drivers of your car, then also the premium goes up.

 Tips to Reduce the Cost of Your Car Insurance

1. Voluntary deductibles – If you want to resolve not so important claims against minor damages on your own, then the premium payable for car insurance is reduced, by up to thirty percent.
2. No claim bonus – If you have not filed a claim during the policy term, then your premium rate can be reduced by up to fifty percent for the next year. No claim bonus is given by insurance companies to a policyholder as a reward for not making a claim during a policy year. This no claim bonus can be transferred if you switch from one insurer to another.
3. Discount on security features – If your car is loaded with high-tech security features, then your car can be insured for low premium rates. Installing such features reduces the probability of theft of your car; however, according to some experts, the maximum discount you can avail through this is only 2.5 percent.

 Add-ons that Increase the Premium, but are Useful

1. Nil-depreciation insurance – A Nil-depreciation policy covers the complete claim for rubber and plastic parts of your car. Without having this policy, an insurance company provides you with only fifty percent of the value of these parts, in case they are damaged. A nil-depreciation policy is highly advisable, as most of the cars coming these days have plastic and rubber parts, although the premium will increase.

 Key Areas where You May Go Wrong When Choosing a Cover

1. Value of the car – Always try to purchase a policy that offers you the highest IDV of your car even if it is charging you a little higher premium rate. It has often seen that people reduce the IDV (insured declared value) of their car in order to lower down the premium rate, which is not a good and advisable practice.
2. Lapse of Policy – If your policy gets lapsed, then your insurer may provide you with a grace period of one week. Post this time, you take a risk of running your car without an insurance policy and you are on the verge of losing all the benefits, such as lower premiums or discounts if you do so.

Author’s Say

Believe it or not, your car is where you spend most of your time, after your home and office and it makes sense to ensure buying a comprehensive car insurance policy. But don’t forget to compare insurance quotes online before buying car insurance policies, as you can save hundreds on the premium payable.