Buying a car insurance is an annual ritual that is often neglected by a majority of car owners in India. Instead of paying attention to what policy they are in, customers generally simply renew there existing policy without paying a heed to the other options available. This customer philosophy is not only present while renewing existing policies, but also while buying a new car. Most of the owners don’t pay attention to what insurance policy is being offered to them by the dealer. Instead of looking out in the market for the perfect car insurance policy, they just opt for whatever is pitched to them by the car dealership. While this is a great way for dealerships to milk some money, customers are at the disadvantage as for the same price, the can get much better terms and conditions and policy inclusions.
One of the questions we are often asked about buying a new car is how to find the perfect car insurance. Well, while we do hope we could answer this question briefly, buying a car insurance policy is a very vital step towards keeping a check on your car ownership costs. Hence, we advice you to read our step by step guide in order to understand each step that needs to be taken into account before opting your next car insurance policy.
1. Types of insurance
It is important to understand the types of insurance on offer in the market to narrow down to the best option for you:
a) Third party liability insurance
This policy involves an insurance cover for damage to property or accidental injury or death to a third party. In India, it is mandatory for every vehicle plying on public roads to come with a valid third party insurance.
b) Comprehensive insurance
Te other most popular insurance type is the comprehensive package. As the name suggest, this particular insurance covers both personal as well as third party damages. Additionally, it covers the owner of the vehicle from theft of vehicle as well as loss through natural happenings like cyclone, flood, earthquake etc.
2. Factors that affect insurance premium cost
Once you have understood the major types of insurance covers on offer, the focus needs to be shifted to the next big thing – premium. Now, insurance premiums constitute to around 35% of your vehicle’s total maintenance cost. This makes it important for you to understand what all factors can affect the premium you may for your car insurance.
a) Vehicle-related risks
The passenger car market is a huge and diverse portfolio. Different cars have different insurance requirements. For example, large SUVs need a lot more maintenance than budget hatchbacks. As a result, there insurance premiums too are on the higher side. Similarly, a diesel engine has more wear and tear parts than a petrol mill, thus making the former more costlier to maintain. Hence, it is important to understand what premium range is being offered for your type of vehicle.
b) Location related risks
This parameter is fairly easy to understand. Insurance companies charge higher premiums for cars that are driven around areas that are more prone to accidents or wear & tear. As a result, cars that are registered around in hills stations, around high-speed expressways and sea shores are often exposed to much higher insurance premiums.
c) Driver profile and record
In addition to the age and profession of the driver of the vehicle, some insurance companies also take into account the gender of the person who primarily drives the vehicle. While thanks to the whole gender equality drives that are currently in place, companies don’t mention it straight-up, but we have often seen cars with women owners being charged higher premiums than male owned vehicles. Additionally, if an individual has a poor insurance and driving record, the policy premium will sky rocket as companies try to insulate themselves from a high-potential crash loss.
3. Avoid insurance scams
Various insurance providers and agents have been seen adding some additional components to your insurance package to make the premium costlier, and thus increase the company’s recurring income. However, here are a few components that you need to take care about.
a) Threshold value
Most insurance policies come with a minimum threshold value, which basically is a minimum repair amount post which the insurance company will be paying for the repair or service. Lower this threshold value, higher will be the premium. As a result, in order to minimize your premium, hike the threshold value. However, doing so will make it essential for you to pay from your wallet for smaller touch ups and repair jobs.
b) Never lower your IDV
A lot of insurance agents also offer you some spammy ways to lower your car’s IDV value in order to minimize the insurance premium. IDV stands for Insured Declared Value, which means it is the value of your car in the eyes of the insurance company. While lowering the IDV will indeed lower your premium, doing so can result in huge losses in case of a major accident that renders your car as a total loss or a write-off.
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