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Buying car insurance is a prudent decision to safeguard yourself from any financial losses due to accidents and damage to the vehicle. Car insurance assures you that no undue financial burden comes your way in case of any mishap.
Other than this, car insurance is made mandatory by the law. The Motor Vehicle (Amendment) Act, 2019, calls for a fine of Rs 2000 and/or imprisonment of 3 months for driving an uninsured vehicle in the first offence and a fine of Rs 4000 and/or imprisonment of 3 months in the second offence. Before these amendments, the Insurance Information Bureau (IIB) said that only 50% of the vehicles had valid insurance, although insurance was mandatory. However, with these new enforcement in place, things are certainly changing for the better. With the IRDAI proposal to increase the third party car insurance premium for luxury cars in FY 20-21, buying insurance for your car is going to be costly. However, with some smart checks and tricks, you can get yourself the best possible deal for your car insurance.
Premium is the amount you pay to the general insurance company to cover the financial loss in case of a mishap. Car insurance premium amount depends on a lot of factors such as the insured declared value of the car, make and model of the car, engine power, and age of the vehicle. At the same time, the premium amount has various components that change with these factors. The major part of the car insurance premium entails third party cover, own damage cover, and personal accident cover.
Other small and optional components are included in the car insurance to give you the best possible coverage. While some components of the car insurance premium are governed and fixed by IRDAI, you can choose to customize other components and reduce your effective premium.
Your car insurance premium is directly linked to the make and model of the car you buy. High end or premium cars will attract a higher premium along with models that have a higher claim rate. Economy cars are usually cheaper to insure as their repair cost is low in case of damage to the vehicle.
Deductibles are the amount you pay from your pocket while making a claim. Higher deductibles will make you part with some amount in case of a claim but reduce your premium amount considerably. For instance, if you opt for a deductible of Rs 5000, in case of a claim of Rs 15000, you will pay Rs 5000, and the insurance company will pay the remaining amount of Rs 10000. Insurance companies offer a discount on premiums when you increase the deductibles because their effective exposure is reduced.
In the case of zero deductibles, you will get the entire claim amount, but the car insurance premium will be higher. Consider an amount that you can comfortably pay in case of a claim and ask the insurance company to increase your deductibles accordingly.
You can always make a claim for a broken rear-view mirror or scratched surface. But it is not a wise decision, as frequent claims affect your claim history and directly impact your subsequent premiums. Also, claiming small amounts from your car insurance cover might seem lucrative as you don’t have to bear the cost of repairs, but it makes you lose your right to No-Claim Bonus (NCB). You can get an NCB every year of not claiming anything. The bonus can start with approximately 20% and can go up to 50% every year for the 5-year tenure of your policy. It makes sense to forego small claims on your car insurance and enjoy the NCB benefit on your yearly premiums.
If you have accumulated a no-claim bonus on your old car and decide to sell the car, you don’t have to lose the benefit. You can ask the insurer to transfer the discount to your new cars comprehensive car insurance. Even if you do not plan to buy a new car immediately, you can ask the insurer to reserve the discount and issue a certificate to you. The accrued bonus can fetch you a huge discount on your car insurance premium when you purchase a new car.
Insurance companies want you to keep your car safe. Hence, they encourage you to install devices that mitigate the chances of theft and damage such as anti-theft alarms, steering wheel locks, etc. Safety features and anti-theft devices not only protect your car but also make you eligible for a discount of 2-5% on your car insurance premium. However, the device being installed should be approved by the Automobile Research Association of India (ARAI). Try choosing from brands that have been approved by ARAI, such as AutoCop and Nippon.
Your car insurance is designed to cover only factory fittings, and the premium is calculated for basic cover. While it is only natural to feel the urge to install all those fancy gadgets like ultrasound sensors, music players installed separately, automotive night vision, etc., consider the fact that it will increase your car insurance premium significantly. If you fail to disclose the additional fittings, your insurer also holds the right to invalidate your claim.
Not paying the premiums on time can cause your policy to lapse. You can, of course, revive the lapsed policy by paying the unpaid premiums with interest or late fees, but you lose claims to discounts and accumulated benefits such as no claim bonus at the time of policy renewal.
The car insurance business is very competitive. Various companies offer customizable car insurance covers at reasonable prices. Compare premium amounts along with the features and benefits offered by the insurance company before you make a decision. Do not fall for offers of “free insurance” or “discounts” without checking on all the details. Such offers may seem attractive but have limited benefits and often lower claim rates. Many insurance company websites, along with online insurance comparison websites, offer detailed comparison based on premiums and benefits of the policy. Also, take time to go through the fine print to avoid any inconvenience or loss later.
Although it makes sense to shop around and grab the best deal on car insurance you can find, sticking to your old insurance provider can also get you some discounts. Many insurance companies offer certain discounts or benefits to their existing customer regardless of the type of insurance they held earlier. Check out the loyalty benefits while you compare the premium and features.
Your credit score is the reflection of your repayment pattern on your previous loans and credit cards. Many insurance companies have now started considering credit scores while calculating your premiums. Your earlier defaults on loans or credit cards can increase your car insurance premium because the insurer considers you a high-risk customer. Repay your loans and credit card dues on time to maintain a good credit score and enjoy a lower premium on your car insurance.
Car insurance policy with maximum coverage and appropriate riders gives you protection against any financial damages in case of an accident. While you cannot avoid the inevitable, you can definitely mitigate its impact on your finances by buying good car insurance.