Is it Mandatory to Buy Car Insurance from Your Auto Dealer?

The only place where you can purchase your car insurance is from your auto dealer. Right?

The answer is a big NO.

Apart from the popular perception that you can only buy your car insurance from your auto dealer, it is also a misconception that it is mandatory to do so. Most people prefer it as it is hassle-free to buy because you don’t need to research and compare between the wide array of insurance options available. Your auto dealer acts as an efficient liaison between you and the insurer. Besides, they also provide other seemingly insignificant services like car covers, free services, etc.

But, wait! Here’s the catch. Your auto dealer may get everything done on your behalf, but it definitely comes at a price. Since your auto dealer organizes all your car insurance needs from scratch, the premium automatically shoots up. In comparison, if you manage to take out some time for browsing through the benefits of every car insurance policy preferably online, you are bound to hit upon a better deal. Not just that, you will also have the independence to choose the add-ons that are relevant to you. That, of course, is better than having to accept the ones that you wouldn’t require, but still end up having to pay the premium for.

Let’s take a look at the pros and cons of buying car insurance from your auto dealer:

Pros

• It does not require the car owner to take an active initiative regarding the purchase. Right from looking for car insurance plans, knowing the features and benefits that they offer to taking a well informed decision – everything is done on your behalf. Can it get more convenient than this?

• Since you are purchasing a car and an insurance policy from the same auto dealer, you will usually be offered bundling discounts.

• The assistance is not restricted to the purchase process only, it extends to post-purchase as well. Your auto dealer might also help you with claim settlement as well if the need arises.

• You can get in touch with the car dealer to get clarifications on the coverage or at the time of claims. The dealer may efficiently assist you in such matters.

Cons

• You will not be able to access as many car insurance plan options from an auto dealer as you will be otherwise. Every auto dealer collaborates with a couple of insurers, whose car insurance plans are offered to those who purchase cars from their showroom. Hence, the car insurance policies that are made available to the car purchasers are restricted to these insurance companies only. This limits the choice of car insurance companies and plans for car buyers. Therefore, while you do not have to put up with the hassle of buying car insurance, you tend to lose out on the wide range of insurance plans that you can otherwise consider.

• Premiums cost higher, exceeding by as high as 40% above online rates when you purchase car insurance from your auto dealer. The rise in premiums can be accounted to the commission that the insurer pays to your auto dealer for making the car insurance plan readily available to you without hassles. This impacts the price of your policy, which in turn, translates to higher premiums.

• Add-ons that your auto dealer offers may not be suitable for your unique needs. However, you don’t have a choice but to pay a certain premium for each of the add-ons which is over and above the premium for the basic comprehensive plan. While, on the other hand, you have the freedom to choose the add-ons you want to opt for when you buy car insurance online directly from an online broker or insurer. What’s more, you have the discretion to not opt for any add-ons.

The following are the add-ons usually offered on car insurance that you may opt for:

• Zero or Nil Depreciation: This add-on makes the policyholder eligible for claiming the entire amount on depreciation of car parts like plastic, glass, rubber and fiber.

• Roadside Assistance Cover: This add-on ensures emergency roadside assistance like fuel refilling, changing flat tyre, repairs and towing service.

• Engine Protection Cover: As apparent from the name, this add-on cover offers financial security against damage to the insured car’s engine as a result of water ingression, causing hydro-static lock.

In conclusion

Buying car insurance from your auto dealer or directly from an insurance company – both has its advantages and disadvantages. You can weigh the pros and cons of both the options and opt for the one that meets your objectives.