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The Anatomy of a Great Car Insurance: A Complete Guide for Beginners

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Published on June 9, 2021. EST READ TIME: 5 minutes

There is a first time for everything in life.

Purchasing car insurance policy is no exception to the adage. However, first-time buyers need to be extra careful, as they have no prior experience, and even an average policy might appear like a great deal. You wouldn't ideally want to be stuck with a policy that offers little help after major damage has been done to your car.

Similarly, learning that your claim request can't be approved because your policy does not have an important add-on cover can cause a lot of financial strain. Therefore, as a smart buyer, you need to choose an insurance policy that fulfils your needs and seamlessly fits your budget. So, keep the below-mentioned tips in mind when you go looking for the best car insurance policy for your four-wheeler.

1. Types of car insurance plans

While policies can also be categorized as Private Car Insurance and Commercial Vehicle Insurance, you will generally hear about three car insurance types with varying scope of coverage. Let’s take a quick look at them.

Third-Party Liability Only Policy: The Indian Motor Vehicles Act, 1988, makes it compulsory for car owners to have a valid third-party insurance policy. This policy covers any bodily injury (that may even lead to death) caused to any third party in case of an accident caused by the insured car. It also covers any property damages to the third party. The condition, however, is that the accident should not be a deliberate act or done under the influence of alcohol or any drugs.

Standalone Own Damage Car Policy: This plan protects against damages done to the car of the insured party due to accidents, calamities, or loss due to theft. The Standalone Own Damage Car Policy, however, doesn’t cover any damage done to a third party.

Comprehensive Policy: This policy is optional but highly recommended by experts. Its coverage includes damage to your vehicle as well as that of the third party. It protects your car in several situations, starting from accidents and thefts to damages caused by any natural calamity or malicious act. Under Comprehensive Policy, you can purchase add-on covers to enhance the protection.

2. Car Insurance- Add-ons

A comprehensive plan is great, but it also has limits. If you wish to boost your policy further, you can opt for add-on covers. Depending on the car type, an add-on helps you save a huge amount of money in many situations. Let’s glance through them.

• Zero Depreciation: You may know that the market value of your car and its parts reduce as years go by because of depreciation. While your standard policy can only get you the depreciated value of car parts in case of an accident, this add-on will help you claim the full cost of replacing them.

• Engine & Gearbox Protection: The cost of repair of certain parts, such as a damaged engine or gearbox, can be quite expensive, and therefore, this cover compensates for repairs related to your car engine. The damage doesn’t necessarily have to be caused by an accident, but damages due to regular wear and tear or by own negligence are not covered.

• Return to invoice: It helps you when your car is damaged beyond repair or is stolen. This cover ensures you get the original invoice value from the insurer. The icing on the cake is that it includes the registration cost and taxes as well. In the absence of this add-on, you will get only the insured declared value (IDV), which can be much lower.

• No Claim Bonus Protection: No Claim Bonus (NCB) is a discount you receive for every claim-free policy period. You can accumulate NCB up to 50% and bring down your premium significantly. With this add-on cover, you can retain your no claim bonus even if you make a claim. It allows you to make two or three claims per year while allowing you to retain your accumulated NCB points.

• Emergency Roadside Assistance: This is another handy cover. It comes to your rescue when your car breaks down in the middle of nowhere. The insurer arranges for refuelling, towing, sending an expert, or getting a flat tire changed depending on the issue you are facing and ensures you are back on track, literally.

• Downtime Protection: Your car could be away for repairs, and this might alter your travel plans. This cover will help bear the expenses you would be spending on public transport for your daily commute while your car is getting repaired.

‘Ten Commandments’ to selecting the right car insurance

Commandment #1: Research well and compare the various plans available to make an informed decision.

Commandment #2: Check the network of cashless garages of the insurance company. This will enable you to get your vehicle repaired in a network garage through cashless services.

Commandment #3: Verify the claim settlement ratio and opt for an insurer with a high ratio. But, also, check the past five year records to better understand their consistency.

Commandment #4: Take feedback from existing customers to know how transparent and hassle-free the claim process is from those who would have experienced it. Also, check on their after-sale services and customer experience.

Commandment #5: Select the correct IDV as the premium increases when you opt for a higher IDV. It is recommended to take note of your needs and budgets before selecting IDV.

Commandment #6: Pick the right number of add-on covers depending on your need to strengthen your standard plan.

Commandment #7: Use your No Claim Bonus to bring down your car insurance policy premium.

Commandment #8: Try to avail other discounts by installing anti-theft device in your car or opting for a deductible to bring down the premium. Also, find out about other conditional discounts the insurer offers.

Commandment #9: Find out full disclosure and do not hide any information from the insurer while buying the policy, as your claim request and policy can get cancelled if the insurer finds out that some crucial details were withheld.

Commandment #10: Read the exclusions carefully to better understand the terms and conditions to avoid any rude surprises later.

Key Takeaway:

When you buy car insurance policy, remember that your knowledge about the various terminologies and other research will come in handy. Only a customer who is well aware of various types of policies, add-on covers, discount options, etc., can walk out with the best possible policy.

Disclaimer: The above information is for illustrative purposes 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:

• Be smart, make the right choice - Always purchase car insurance online

• Ten commandments of the wise to save more on car insurance premium

• A quick guide to buying motor insurance online

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