You are at the cusp of getting your hands on your dream car. Your day-dreams on cruising down the road, full speed, with the wind in your hair, are becoming more frequent as you near the buying date. But one particular thing can crash-land on your dreams, depending on the way you see it —a car insurance policy.
While the mere mention of “insurance” clouds our mind with inconceivable technical terms, getting a car insurance policy is actually an easy task when you break it down.
Here is a comprehensive guide on how to choose the right car insurance policy for your new car.
Why getting a car insurance is important
There are two important reasons why you must get a car insurance policy
- A car insurance policy will protect you in the event of an accident. For example, let’s say you land in an accident and cause damage to another person’s vehicle or his property. Then a car insurance policy will cover for liabilities associated with this. If you cause bodily damage or injury to this person, that will be included as well. If you have opted for comprehensive coverage, then damages caused to your own vehicle will be covered. Thus getting an insurance policy is a safeguard to your finances when an accident happens.
- Car insurance policy is a mandatory document that you must have in your car. It is illegal to drive in India without a car insurance policy. If you are caught by the police without this document, then you will have to pay a fine of Rs.2000/- for a first-time offense and Rs.4000/- for subsequent offenses. So don’t flaunt the rules and get yourself in a pickle situation where you will have to dole out more money.
Are you getting a new car insurance policy or renewing your old one?
You can buy a fresh car insurance policy for the new car you intend to buy, or you can renew your old insurance policy which is nearing its expiry date. If you already have an insurance policy but would like to switch to another insurance company, you can do that as well. Intimate your current insurer and let them know of your request.
Depending on the insurer, sometimes penalties could be levied for canceling the policy midway during the tenure period. You can get the NCB bonus transferred from your old insurer to the new insurer.
What coverage do you want?
You can file the car insurance policies offered by each insurance company into the basic three categories. These categories depend on the extent of the coverage.
- Comprehensive Insurance policy – In a comprehensive insurance policy if you cause damage to another person’s property or vehicle; or if you cause bodily injury or death to them, then these liabilities will be covered. This part is known as the third-party liability component since they pertain to damages caused to another person because of you. Similarly, if your car is also damaged in the accident, then repair costs for that will also be borne by the insurer. This is the own-damage component. If you have standalone personal accident coverage, then that will cover bodily injury or death caused to the driver/owner. Or else you can buy a separate personal accident coverage along with this policy. You can further customise this policy to increase the extent of coverage for an additional fee with add-ons. These add-ons include Return to Invoice coverage, Zero Depreciation coverage, Engine and Gearbox protection cover, etc.
- Third-party liability insurance policy -When your car causes damages to a third-party in an accident, then those liabilities will be covered by this policy. This is the standalone policy of the third-party liability component in a comprehensive insurance policy. Here damages caused to your own vehicle will not be covered; only third-party responsibilities will be covered.
- Own damage insurance policy -You can buy the standalone own-damage component of the comprehensive insurance policy. Here no third-party liabilities will be covered. Only damages to your own vehicle will be covered. It must be noted that it is illegal to drive in India with just this policy. Your policy must either have the third-party liability component, or you can buy the stand-alone third-party liability policy.
Check these items before buying the policy.
Here is an exhaustive checklist of things you must consider while buying an insurance policy:
- IDV – Insured Declared Value is the amount for which you insure your car. It is the amount that you will get from your insurance company when you land in an accident. You must be given the choice to set the IDV value. However, it is best to choose the IDV as the current market value of your car.
- Premium – Premium amount is the fees you pay to the insurer for providing you with the coverage. The premium must be justifiable for the coverage that you are getting. If you have kept a higher IDV, the premium would be higher and vice versa. Also, do not just jump into a low premium car insurance policy. Instead, carefully analyze the type of coverage you want, compare the same with other insurance companies, and choose the right one.
- Type of policies – If you are a beginner driver, it is best to opt for a comprehensive insurance policy. Even if you are a seasoned driver, a comprehensive insurance policy will give you peace of mind. If you already have a third-party insurance policy and do not want to cancel it, you can buy an own-damage insurance policy to get full coverage.
- Add-on – You can buy add-ons along with your comprehensive insurance policy. If your car is getting older, getting a Zero Depreciation cover will waiver of the depreciation cost deductions from your insurance amount. A Return to Invoice cover will entirely give back the invoice amount of the car if your car is completely damaged in an accident. There are many such add-ons that you can buy for an additional sum from your insurer. These add-ons might vary from insurer to insurer.
- NCB- No Claim Bonus is the bonus amount you get from your insurer for all the years that you haven’t filed a claim with them. The longer you go without claiming, the higher your NCB will be. NCB mostly manifests as a discount in the premium you will have to pay. Some insurers might also give NCB as an increase in the IDV amount. You can even transfer this NCB streak from one insurance company to another.
- PA coverage – While a comprehensive insurance policy will cover for damages caused to your own vehicle, there is still one major loophole that it still lacks — bodily injury or death caused to oneself? For this, you will need a Personal Accident cover. PA cover will provide you with financial compensation in the event of bodily injuries leading to total/partial disability or death caused due to accidents.
Compare policies online before you buy
The omnipresent internet can be your ally on your quest for the right insurance policy. Do thorough research on the frontrunners as well as the newcomers in the insurance sector. Read through their policy coverage, their terms, and conditions, the premium vs IDV amount, types of add-ons, etc. before locking in on one policy. Another crucial factor to consider is the claim settlement ratio—higher the claim settlement ratio of an insurance company higher the chances that your claim will get settled.
Is it better to buy a policy online or offline from an agent?
It is always best to buy online car insurance. You can compare the policies from various companies from the comforts of your home and make an informed choice on the policy. Most companies will also offer you discounts, offers, and perks for buying online. You can also keep track of price drops from your intended insurance companies online. The whole process of getting a fresh policy will get over in a matter of minutes. If you are buying from an agent, there is always the hassle of a lot of paperwork, the back-and-forth processes, and the additional fee that you would have to pay to the agent on top of the premium amount. Hence it is always recommended to buy the insurance policy online.
Read more: Detailed Guide on Buying a Used Car
Buying a car insurance policy is not all that a herculean task. With the power of the internet at your disposal, researching and understanding the nuances of various terms and conditions related to insurance is now easier than ever. There is no more need for grappling with tedious paperwork and mind-boggling jargon. Getting an insurance policy now is as easy as ordering your favourite dish.