With numerous insurance companies offering car insurance policies, choosing the right one can be an overwhelming task. From the type of policies to important factors that affect your decision, and from deductibles to add-ons, finding the right fit requires a good understanding of the options available to you. Today, we will share five simple steps to help you choose the right car insurance in India.
How to Choose Car Insurance in India?
Step 1. Choose the right type of car insurance policy
In India, car insurance policies are of two types – third-party liability cover and comprehensive cover. The third-party liability cover is compulsory in India, which covers you from the liability of any damage to third-party property, injury, or death.
On the other hand, comprehensive cover is optional and offers financial protection to you against third-party and own-damage liability in the event of an accident, collision, natural disaster, or theft. You need to decide if you want to buy a third-party liability cover only or opt for a comprehensive policy.
Step 2. Understand the factors that determine the premium rate of the policy
There are some important factors that insurance companies use to calculate the premium of the car insurance policy. It is important to understand these factors so that you can assess if the premium charged is optimal. These factors are:
- Type of vehicle: Modern cars with advanced technology and cars used for commercial purposes are considered riskier than regular cars. The type of vehicle and the fuel type (petrol, diesel, etc.) also plays a crucial role in determining the premium rate. High-end cars will have higher premium prices than basic, cheaper cars. Similarly, the premium for diesel cars is higher than petrol cars.
- Location: The location where the car is registered plays a crucial role in determining the premium rate too. The probability of accidents, crime rates, and similar factors that pose a risk to the car and are location-dependent can increase or decrease the premium rate. Considering the density of population, the premium for urban cars is higher than rural cars.
- Driver details: Your age, marital status, gender, and other personal details also contribute to determining the premium rate. For example, older males are less likely to be in a road accident than older females (according to surveys). Hence, older males might pay a lower premium than older females.
Step 3. Minimize the premium rate without reducing the coverage
While a comprehensive cover offers maximum protection, the premium can be high for certain cars and locations. However, the good news is that there are various ways in which you can minimize the premium rate without compromising the coverage. Here are some tips:
- Use the voluntary deductible feature to reduce the premium. This means that whenever you file a claim, you agree to absorb a certain pre-decided percentage of the claim amount while the insurer pays the rest. So, if you file a claim of Rs 50000 and have agreed to a voluntary deductible of 20%, then the insurer will reimburse only 80%, in this case, Rs 40000.
- Almost all insurers offer a No Claim Bonus (NCB) offering a discount on the premium rate to vehicle owners who have not raised more than one claim in the previous year
- Install the latest security features to reduce the risk of your car being stolen and get a discount on the premium rate
- Some insurers offer discounts if the owner-driver of the car is associated with certain professions
- You can also get a discount if you are a member of organizations like the Automobile Association of India (AAI) or Western India Automobile Association (WIAA)
Step 4. Choose Add-ons carefully
Add-ons or riders allow you to customize the car insurance policy according to your requirements. Most insurance companies offer a range of add-ons like a zero depreciation cover, roadside assistance, engine protect, tyre protect, etc. While each of these add-ons will increase the premium, they also ensure complete protection. Hence, choose them after assessing your car use and insurance requirements carefully.
Step 5. Pay attention to the IDV of your car
IDV or Insured Declared Value is the maximum amount that the insurer is willing to pay if your car meets with a mishap and is no longer capable of running on the roads or if the total cost of repair is more than 75% of the IDV or if your vehicle is stolen. When an insurer calculates the risk and premium on the car insurance policy for your car, he calculates the IDV. Many people prefer a low IDV as it reduces the premium liability. However, it is important to remember that since IDV is the maximum sum insured, agreeing on a lower IDV would imply receiving a lower payout in the event of the total loss of the car.
Before you buy car insurance, it is important to be aware of the points mentioned above. Remember, every car and the car owner is unique and demands certain features in the car insurance policy. Spend some time assessing how you intend to use the car and what are the risks it is exposed to. Based on that, choose a policy and add-ons and give your beloved car all the protection it deserves. Good Luck!