A Must-Read Guide for First-time Car Insurance Buyers
Buying a car is always a well-planned process. Since it’s a huge investment and a considerable asset for the household, it is natural to be elated after driving your own car out of the showroom. However, do not forget one critical piece of documentation that is mandatory for your car – the car insurance.
Interested to know what all factors you need to keep in mind as a first-time car insurance buyer? Then read on and be informed:
What is car insurance?
Car insurance is a protection that you buy from an insurance company. This protection covers damage to the car and may also cover hospitalization costs in case of injury. The amount you pay in order to avail of this protection is known as the premium.
Types of car insurance
- A basic insurance made mandatory by the Government of India is a third party insurance. In an unfortunate case, when your car meets with an accident with another car (third party), the insurance company will compensate you for damage repair to the third party car.
- A more elaborate coverage will be via a comprehensive insurance. In the same scenario as mentioned above, you get compensated not only for third-party repairs but also for repairs to rectify your own car damage.
How is premium determined?
A premium is an amount you pay to the insurer to avail of the insurance protection. Today, with the advent of car insurance comparison facility available on the internet, it has become very easy for people to log online and find the best quote to buy car insurance online. If you too have done this you will see that different providers offer different premium amounts for the same car. You may be wondering how exactly the premium is determined for a policy.
A high-level analysis shows the below variables that come to play to calculate premium for car insurance
- Car make model and variant
For instance, an SUV will command a higher premium than other cars. A luxury car like Audi or Mercedes will command a much higher premium amount
- Geographic location
If you reside in an urban city where the vehicle density is high, the likelihood of accidents will be higher than a rural area. Hence the premium will be higher in an urban city than a rural area.
- Fuel type
Premium for a CNG/LPG fitted vehicle will be higher than a petrol/diesel vehicle
- Year of manufacture
The older the car, the lower will be the Insured Declared Value (IDV) and the lower will be the premium (see further below to know what IDV is)
- Voluntary deductible
This is the amount that the policyholder will agree to pay for a repair bill claim. Any amount over and above the voluntary deductible will be borne by the insurer. It is obvious that the higher the voluntary deductible, the lower is the burden on the insurer, and hence the lower will be the premium.
- Use of ARAI approved security devices
ARAI approved security devices like steering lock and anti-theft device will lower your premium by as much as 2.5%
- No Claim Bonus (NCB)
With every uninterrupted year of filing no claims, you are entitled to a No Claim Bonus (NCB). So for the 1st year of zero claim, you get 10% off on your premium amount. If you don’t file a claim for 5 continuous years, you get a discount of 50% on your premium amount.
Make sure that you check these variables out when doing car insurance comparison
What is IDV?
Insured Declared Value is the amount you are entitled to receive in case the car is stolen or is beyond repair. It is the market price of the car. If the car is manufactured in 2017, its IDV will be the highest in 2017. But in 2018 it will go down because of depreciation. In 2019, the deprecation will increase and market price of car (and hence the IDV) will further erode. A simple formula is
IDV = Car selling price MINUS Depreciation
It is clear the depreciation will increase with the age of the car. Here is a schedule for the same
|Age of the car||Depreciation % for IDV computation|
|>6 months & <=1 year||10%|
|>1 year & <=2 years||20%|
|>2 years & <=3 years||30%|
|>3 years & <=4 years||40%|
|>4 years & <=5 years||50%|
What is personal accident cover?
A personal accident cover is an element of your car insurance coverage that protects you in case of bodily injury in an accident. Considering the risks of driving on Indian roads, the car insurance policyholder must enable full protection in case of an untoward accident. This cover is applicable at all times you are using your vehicle.
If your present policy doesn’t have adequate coverage for this, then you can extend the coverage by opting for a separate personal accident insurance policy. The coverage is for a limited time and can be kept valid through periodic renewals.
Car insurance claim process
With so many insurance companies in the fray today in India, the car insurance claim settlement ratio is one of the key factors that helps the policyholder to go with a particular company. Hence every company seeks to streamline the claim process so that there is minimum hassle to the policyholder.
Also at the time of car insurance renewal, the ease of obtaining claim will determine if the policyholder will switch to another company or stay with the same insurer. Here is a quick overview of the correct process of filing claim.
- File for a claim with all documentation on the prescribed claim application form
- A surveyor will be sent to assess the damage. You will receive a copy of his report
- If the damage is severe, then it is recommended to quickly capture the scene in video or photos. Also take down the name and vehicle number of the third party involved in the accident
- Once the surveyor report is with you, you can get the car repaired and submit the repair bills to the company for reimbursement
Make sure that these steps are followed so that you don’t face rejection for car insurance claim.
Car insurance renewal
It is strongly advised to renew your policy before its due date. Doing car insurance renewal on time will make sure that you can continue driving the car on roads without incurring any penalty and continue getting the coverage against mishaps. Nowadays with car insurance online process, it has become very easy to do a comprehensive car insurance comparison and then pick one that suits your preferences.
With a meticulous research you can even opt to renew your car insurance with another company. Just make sure to carry forward your no claims bonus to the new company to avail of the discount.
How to choose best car insurance policy
Today, the online avenue has made it possible to check car insurance online and compare policy premium amounts for multiple providers on a single screen, and that too without stepping out of the comforts of your home or office.
Simply put in the details for your car, your city, and select the add-ons you want to take. You will be presented with a list of premiums offered by the different companies. The facility of car insurance online helps in obtaining the best quotes for your insurance policy and avoid going with expensive quotes when you have cheaper quotes available to you.
How to calculate car insurance premium online
A site like RenewBuy will have a very easy to use calculator that quickly computes premium for car insurance online based on specific factors. Some of the variables you need to provide information on include –
- The make, model, and variant of the car
- Age of the car (year of manufacture)
This information will come in handy if you are planning a car purchase for the first time and want to know the basics of getting new car insurance.