Are you saving money to buy a new car? Or do you plan on taking a car loan so you can get to ride your dream car, sooner? If purchasing a new car is a decision that is looming over your horizon, then there is one crucial factor that you must not overlook – getting a car insurance policy.
A car insurance is a mandatory document that you must have while you drive on Indian roads. If you are caught driving without this, then you will be liable to pay a fine of Rs.2000/- for first-time offences and Rs.4000/- for repeated offence.
But apart from being a mandatory document, getting a car insurance policy has various other perks such as covering for losses caused by your car, legal liabilities in the event of an accident, reimbursing you the amount in case your vehicle is stolen, etc.
Before you jump into buying an insurance policy provided by your car dealer, it is best to do a thorough research online regarding terms and conditions related to it. Here are 10 important things that you must know about car insurance before you buy your first car.
1. Choose the right insurance policy as per your requirement.
There are two types of insurance policies:
a. Third-party liability only insurance policy– In this policy, if your car causes damages to another person’s vehicle or property, then expenses related to it, will be covered. It also includes injuries/ death caused to another person by your car. However, this policy does not cover damages caused to your own car. It is best to opt for this policy only if you are a seasoned driver and if you have a good track record of driving. If you often land in mishaps or if you are a beginner driver, then this policy is not for you.
b. Comprehensive insurance policy – Along with the benefits mentioned in the Third-party Liability only policy, a Comprehensive policy also covers the damages caused to your own vehicle during an accident, theft, natural calamities, riots etc. You can further extend this coverage with add-on features. This is an ideal policy for every type of drivers, be it a beginner or a pro. You will be comprehensively covered with this policy.
2. Always have a Personal accident cover – A Personal Accident cover will pay for the driver’s bodily injuries, death or any permanent disability caused due to an accident. This cover is also mandatory as per the Motor Vehicles Act, 1988. Either you can buy a standalone cover, or you can buy one along with your car insurance policy. This will reduce the financial stress on your family if you are permanently disabled or worse, expired.
3. Know what an IDV is – Insured Declared Value (IDV) is the amount for which you will be insuring your car. When you file a claim with your insurance company, then they will reimburse you this IDV amount, minus a few compulsory deductibles. While opting for a Comprehensive insurance policy, your insurer must give you the option to choose the IDV. It’s best to set the IDV as the current market value of your car. If you set a higher IDV, then the premium you will have to pay will be higher and vice versa.
4. Premium paid vs the IDV – The premium is the amount that you have to pay for the benefits offered by your insurer. The premium of your car insurance policy is dependent on the following factors:
- The cubic capacity of the engine.
- Model of the car.
- Age of the car.
- Place of registration.
- Petrol or diesel variant.
Ensure that the premium you are paying is well worth the IDV. Compare the premium vs the IDV ratio online with other insurers as well, before locking in on one.
5. Add-on features to extend coverage – Add-ons are the extra features that you buy along with your Comprehensive insurance policy to extend the coverage. This way, whatever you lack in your insurance policy can be made-up with the add-ons. Opt for the insurer that provides the right add-on for your style of driving. For example, if you love going on long drives, opt for a Breakdown Assistance cover so that your car will be repaired if it gets broken down mid-way. Or if you own an expensive car, opt for an Engine and Gearbox protection cover.
6. Transfer No Claim Bonus – No Claim BonusNCB) is a bonus offered by your insurance company for not filing any claim with them. With each passing year that you haven’t filed the claim, this bonus amount will increase. Usually, it would be a discount on the premium you have to pay, or it would be an increase in the IDV amount. If you are switching your insurance company or if you are buying a new car, then make sure you transfer the NCB you have collected over the years to your new insurer.
7. Claim settlement ratio – After familiarising the terms and conditions associated with your insurance policy, research on the claim settlement ratio of the insurance company you intend to choose. Claim settlement ratio is the ratio of the number of claims settled to the total number of claims filed with the company. Higher claim settlement ratio is what that you should look for so that there is a higher probability of your claims getting accepted.
8. Be aware of the deductible charges – For every claim being settled, you will not be getting the full IDV amount. There will be certain charges deductible from the IDV. There are two types of deductibles :
a. Compulsory Deductibles – Here a specific amount will be deducted from the IDV by your insurer. These deductibles must be explicitly communicated to you before you purchase the insurance policy
b. Voluntary deductibles – You can also voluntarily bear a portion of the insurance amount. In this case, the premium you have to pay will be lesser. But during an accident, you will have to bear a portion of the expenses. Read through the terms and conditions of the policy to understand what these costs are so that you are not caught unaware during the settlement phase.
9. A wide network of garages for cashless option – One of the attractive features offered by insurance companies is the cashless facility. If the insurance company has a tie-up with a large number of garages, then you can give your car for repair after an accident at any of these garages. The company will pay directly on your behalf at these garages. This is a pretty hassle-free method because otherwise, you will have to pay for the repairs first, submit all the documents with the insurer, get it approved and only then will you get the reimbursed IDV amount.
10. Customer service – An excellent customer service is what that sets apart some of the top insurance companies from its competitors. A 24×7 customer care is needed so you can call them even in the middle of the night if you land in an accident. They must also be ready to clear all your doubts and be as transparent as possible with the terms and conditions. There must not be any hidden charges or malpractices from the insurer’s side.
You should have a thorough understanding of the claim procedure before you agree to the policy. Have an open conversation and understand every aspect of your policy before you purchase it.