How to Choose an Appropriate Car Insurance Plan

Last Updated: Jan 05, 2022 | 1,056 Views

Car insurance protects you and your vehicle from losses arising out of an unforeseen accident or event. With numerous car insurance policies available, how do you go about choosing the most appropriate one? Here is what you need to consider before making a choice.

The Option of Third Party and Comprehensive Insurance

It is mandated under Indian law that any motor vehicle owner should take at least a third party cover for damages or loss incurred to a third party on the road. Driving a motor vehicle on Indian roads without insurance is a punishable offence under the Motor Vehicles Act. So as a vehicle owner you don’t have much of a choice here.

A comprehensive insurance cover offers third party protection as well as an insurance cover for you and for your vehicle against any damage, loss or theft. Though not mandated, it is always recommended to opt for a comprehensive policy. A comprehensive policy would give you a wider coverage against small collisions, major scratches or bumper hits.

Choosing an appropriate policy

When choosing an appropriate car insurance policy, the most important aspects that would help you narrows down your choice, for almost all vehicles are as follows.

Ø  What you would be paying- Your Premium

Car insurance premiums are not a standard amount and vary for different cars. Premiums are based on:

a)     The IDV or the insured’s declared value of the car. This is the market value of the car at the time of purchase of insurance. It is not the price at which you have purchased the car. It takes into consideration depreciation, wear and tear of the vehicle.

b)    Car cubic capacity is the capacity of the car engine. The more the cubic capacity of your car the more will be your premium.

Ø  Availability of bonus and discounts

a)     No Claim Bonus is given to policy holders for claim free policy years. With an accumulated no claim bonus over time, your premiums could be reduced substantially.  You could also transfer any accumulated no claim bonus from your old vehicle when you purchase a new one and get a discount on the new car’s insurance premium.

b)    Insurance companies also offer discounts on vehicles installed with anti theft devices approved by Automobile Research Association of India (ARAI). This discount is around 2.5% of the premium, up to a maximum of Rs 500.

c)     Voluntary excess: Premiums could also be reduced with voluntary excess. This is the option to bear a pre determined loss for every claim made.

 Ø  Add-ons with your policy

Check to see if there are any add-on benefits with the policy. Many insurers offer benefits such as Personal Accident cover along and cashless claim settlements.

Option of Zero Depreciation- For cars less than 3 years old

IF you have a fairly new car, that is less than 3 years old, opt for a zero depreciation cover. A zero depreciation cover offers a full claim amount without taking into consideration any depreciation on the value of the parts replaced. This option is available for a slightly higher premium. The parts that would be covered under this option are fiber, glass, rubber parts and plastic. A standard car insurance policy considers depreciation of parts in the range between 0 to 40%. Now with zero depreciation option, a 100% re-imbursement on replaced or depreciated parts can be availed.

Luxury Car Owners

Maintaining a luxury or a high end car doesn’t come easy. Cost of repairs could run up pretty high and could burn a hole in the pocket. Lower availability of authorized repair workshops and also of spare parts, make it an expensive affair. It is thus prudent to take wider coverage for such cars. Insurance for luxury cars should include

a)     Engine cover

Opting for an engine cover could protect you against any damage in case of flooding, water intrusion etc… The cost of replacement of a luxury car engine may run up to almost 30% of the cost of the vehicle.

b)     Ask for a Zero Depreciation Reimbursement

A depreciation reimbursement settles the full claim amount without taking into consideration any depreciation on the value of parts replaced. This is an added advantage as the spare parts and the cost of its replacement could run up high in high end cars. 

Petrol Car Owners

If you are the owner of a petrol car, there is some reason to cheer. Petrol cars have lower insurance premium than cars that run in on diesel, LPG or CNG. This is because; insurance companies feel petrol cars in comparison to diesel cars would be used much lesser.

Second Hand Car owners

If you have purchased a second hand car and are seeking insurance for the same, your IDV would be the market value of the car, irrespective of what you would have actually paid for. As vehicles undergo depreciation over time, the value of the car decreases too.

Car owners in Tier 1 cities

If you are a car owner registered in a Tier I city, the premium that you would be paying would be much more than a Tier II Tier III city. This is because insurance companies consider there to be more risk of theft or accident in a Tier I city.

Important Points to keep in mind

To optimize on your car insurance plan, here are a few important points to keep in mind.

Ø  Do not make small claim. This would help you accumulate your No Claim Bonus.

Ø  Understand your policy well. Read between the lines and understand the terms and conditions to know what is covered and what is not. Check to see if there are discounts on renewal of policy.  

Ø  Drive Safely. Needless to say careful driving could minimize the risk of accidental damage to your car. 

Ramya Ramachandran
Ramya Ramachandran aggregates news on anything related to insurance in India. Keeps you updated.