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Know Your Insurance – Your Ultimate Guide to Car Insurance Premium

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Published on March 12, 2021. EST READ TIME: 3 MIN

In a world where money is absolutely precious, everyone wants to pay the lowest possible amount for any product, and the same applies to insurance policies as well. Third party car insurance is mandatory in India; hence, every car owner has to buy at least a basic car insurance policy before they hit the road. However, most car owners buy insurance with a pre-set notion that the premium paid will go waste if they don’t make a claim. Hence, they negotiate with the insurance agent and get fascinated by attractive deals and discounts.

Here are some reasons why you should be cautious and not get fascinated by attractive deals on an insurance policy.

• Lower IDV: When you negotiate with an agent for economical car insurance, he may reduce your vehicle’s insured declared value (IDV). For instance, say the ex-showroom price of your car is INR 10 lakhs and its IDV after depreciation is INR 8.5 lakhs. For this, the insurance agent may ask you to pay a premium of INR 25,000. However, you negotiate with the agent and he brings down the premium to INR 22,000. He must have done so by reducing the IDV of your car to INR 7.5 lakhs. You may not know this until you make a claim and receive a low payout.

• Higher voluntary deductible: This is the amount you agree to pay from your pocket in case your car meets with an accident. Many times, insurers increase the voluntary deductible to lower the premium quote. When a car accident happens, you will have to pay a huge amount from your pocket.

• Inflating the price of a standard policy: Some agents increase the price of a standard car insurance policy and then offer a discount on the premium to impress and attract buyers. Hence, it is wise to do some research before buying a policy.

• Removal of add-on covers: When you try to bargain with the agent to lower the premium, he may remove some add-on covers from your policy. Certain add-on covers are important and removing them can cost you more in the long run.

Factors affecting the premium of a car

• Car make and model: If your car has multiple safety features and locking mechanisms, the risk of it getting stolen is less. Hence, the premium will also be lower when compared to a car with fewer safety features. However, you have to pay a higher premium for a sports car because of the higher risks of theft and accidents.

• Insurance type: The car insurance premium will also depend on the type of insurance you take. If you take a basic third-party insurance cover, the premium will be low. However, if you take a comprehensive car insurance policy with wider coverage, the premium will be comparatively higher.

• Add-on covers: Insurance companies offer different add-on covers, such as zero depreciation cover, no-claim bonus protection, engine and gearbox protection, emergency assistance cover, return to invoice and downtime protection. The more add-on covers you choose for your policy, the higher will be your policy premium.

• No claim bonus: If you do not make any claim during the policy year, the insurer will offer no claim bonus. With this, you can save up to 50% on your car insurance premium.

• Voluntary deductible: This is the amount of money you agree to pay during claim settlement. Hence, the higher the voluntary deductible, the lower will be your car insurance policy premium.

Tips to reduce car insurance premium

• Increase voluntary deductible: If you want to pay a lower premium for your policy, you can choose a higher voluntary deductible.

• Do not claim for affordable expenses: This will help accumulate your no claim bonus and reduce the premium.

• Install anti-theft devices: These devices safeguard your car and reduce the chances of making a claim. Hence, the insurer will reduce your insurance premium.

• Compare premiums online: Use an online premium calculator to calculate and compare policy premiums easily. You can also get better deals and discounts online and buy car insurance without any paperwork.

• Transfer NCB: When buying a new car, transfer the accumulated NCB of your old car to the new one. This will reduce the insurance premium on your new car.

• Prevent policy lapse: Renew your car insurance on time to avoid a policy lapse. This is important to qualify for NCB.

Conclusion

A car insurance policy is an important product that should be taken after careful thought and research. Also, do not get swayed by the deals and discounts that insurance agents offer when purchasing a policy. Many times, agents agree to the discount you ask for on car insurance premium by reducing the IDV of your car or removing the add-on covers. Hence, read the policy fine print carefully to avoid wrong-selling and miscommunication.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by 

S. Gopalakrishnan | Motor Insurance Expert | 40+ years of experience in insurance industry

A veteran in insurance industry. S. Gopalakrishnan is a name to reckon with in the field of reinsurance, he has headed the Reinsurance department and has rich experience in other fields of motor insurance. He loves to share his opinion on latest topics in the insurance industry and how he can help people in safeguarding their assets using insurance products.

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Few Other Articles:

• Insurance for Luxurious Cars

• Benefits of No Claim Bonus On Car Insurance

• 5 Myths About Car Insurance in India

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