Have you Considered these Features of a Car Insurance Policy?

26 April 2020 | 2067 Views | By

Buying a car is a big decision for any person. We spend a lot of time researching the best car models, safety features, engine, mileage, color options, financing options etc., before making the actual purchase. But most of us have very little knowledge about the next step that entails a car purchase – getting it insured.

The basic Third Party Car insurance (explained later in the article) is mandated by law in India under the Motor Vehicle Act (MVA), 1988. After recent amends to the MVA resulting in increased penalty for uninsured vehicles plying on Indian roads, the sale of motor insurance policies has seen a sharp rise. Moreover, with frequent cases of traffic indiscipline, road rage and rule-breaking being reported each day, it has become even more important to choose your car insurance policy with as much consideration as your car.

Why is it so important to have Car Insurance?

Most of us have a fair understanding of car insurance policies, but for those who are not aware yet we will briefly explain the concept for you. A car insurance policy, just like any other insurance, works on a ‘use it or lose it’ model. In simple words, you pay an annual premium to purchase (or renew) your insurance policy, which provides financial support in case of accidents or other unfortunate events. But, you can claim the insurance amount only if you face a serious accident, else you lose the annual premium. Nonetheless, the importance of car insurance should not be ignored.

What is the most basic Car Insurance?

Car insurance policies offer varied levels of protection to the vehicle, the insured and the victims of an accident. Based on the level of coverage, there are three primary types of car insurance policies offered by insurance providers:

A. Liability

This type of insurance provides the bare minimum level of coverage that is required legally. This policy pays for damages, legal expenses, medical expenses, lost wages, and other consequences suffered by those who have sustained injuries due to the accident. Third Party insurance is a type of liability insurance.

B. Collision

This type of insurance policy covers property damage and vehicle’s repair expenses incurred as a result of a traffic accident, collision with trees, collision with building, etc. In rare cases, when your car is declared as “totaled” by the insurance provider, the insurer may help you obtain a replacement vehicle of the same market value or the down payment amount for another one.

C. Comprehensive

This is the top most level of coverage in an insurance policy. This type of insurance covers vehicle damages, property damages, theft, fire, injuries to driver and co-travelers, hospitalization expenses, damages due to natural calamities, etc. One can pick and choose benefits to customize their coverage according to their needs. This policy, however, has the highest premium amongst the three categories.

These days, most automobile retailers have tie-ups with insurance corporations to provide car insurance policy during a car purchase. So if you own a first-hand vehicle it is highly likely that you might have also purchased an insurance policy with it. Even in cases of a second-hand purchase, it is guaranteed that your vehicle will be covered by a basic insurance policy.

You must now be wondering, “How can I check my car insurance?” Well, the easiest way to check for insurance is to ask the dealer for insurance details while purchasing the vehicle. In case you have forgotten about your insurance details, you should look for your insurance documents or skim through your bank statements to identify insurance premium transactions to your insurance provider’s account. If none of the traditional ways yield a productive outcome, it is pretty easy to check your car insurance status online as well through a government website – Vahan NR e-services. This portal maintains digital records of all Indian vehicles registered over the last ten years. All you need to do is enter your vehicle number to know the validity of your vehicle’s insurance

Although buying a vehicle comes with an undisclosed rule of buying basic vehicle insurance along with it, there is no compulsion on buying a comprehensive policy. It is, however, important to back yourself with a good motor insurance policy to relieve your financial and mental burden.

What are the Advantages/Disadvantages of Car Insurance?

There are many compelling reasons and advantages of buying a buy a car insurance policy, some of which are listed below:

Damage Cover – Managing and repairing cars is an expensive affair. A car insurance covers most of the repairs/replacements to reinstate the vehicle in a good condition
Reduced Liability – Third Party Liability (TPL) car insurance, which is the most basic type of motor insurance, is mandatory in India. A TPL policy covers you against the legal repercussions of an accident. In case you cause an accident that injures another person or damages their property, the TPL will pay for their treatment and repairs thereby saving you from the legal ramifications. It covers lawsuits expenses and legal fees resulting due to the accident.
Injury and Hospitalization Cover – If an accident results in serious injuries or hospitalization, motor insurance policies typically pay for a major portion of the hospitalization and treatment costs for the vehicle occupants
Affordability – Car insurance policies are not too costly, more so when purchased online. With lower operating costs and elimination of broker commission, an insurer is happy to pass on the monetary savings to the customer.
Premium Discounts/ No claim Bonus – Insurers also offer a substantial bonus for not claiming on your car insurance during the policy period. The bonus acts as a discount on renewal premium and can be earned starting from 20% in the first year to 50% in the sixth year. Thus, it is usually advised to not claim for minor damages.
Ease of access – Given the surge in internet penetration among Indian users, most insurance providers have expanded their service to provide online support for policy purchase, claims, and renewal. So, the process of availing a car insurance these days is just a click away.
Other benefits – Apart from covering car and traveler damages, there are various added benefits of comprehensive insurance policies:
1. Many policies help pay a family’s expenses after the insured’s unfortunate demise in a car accident.
2. A more holistic policy may cover accident-related expenses such as towing charges, overnight hotel stay, transportation, etc.
3. Many policies also cover for loss or damages due to natural calamities up to a certain extent
4. Damages due to theft, fire, or other man-made events are also covered in most insurance policies
5. Additional discounts are provided on premiums for cases of theft or for buying multiple policies from the same insurer
6. Various add-ons are offered to extend the coverage of car insurance policies to suit every insured’s unique needs

Given its pool of benefits, people instinctively buy a car insurance policy presuming that it provides exhaustive cover. But there are many limitations of a car insurance policy that are hidden in its fine print. Many times, specific clauses uncover during the time of claim settlement. The most common pitfall that is faced by policy owners is that their policy may not cover the entire vehicle but only specific parts under its damage coverage. Another prevalent grievance is that most insurance companies take a long time to settle the claim amount, thus adding insult to the injury.

First-time car owners often go ahead with the insurance policy the car dealer suggests. As a result, the customers do not get a chance to spend ample time going through the policy details and comparing it with other options. In many cases, car dealers have pre-arranged deals with insurance companies leaving no flexibility to the buyer to choose their preferred insurer. This way, one ends up buying a policy that might be over comprehensive or way too simple for one’s needs. To avoid falling into the trap you should consider the following factors before picking the right insurance policy for your car:

1. Ensure that you are buying a mandatory (by law) Third Party insurance before driving taking your car out for a ride. This is the most basic type of car insurance which is typically provided by the car dealer for a premium factored into the car’s on-road price.

2. Know your coverage in the Third Party insurance policy. As the name suggests, a TP insurance offers protective cover against damages caused to any third person (neither insurer or insured), vehicle or property. It, however, does NOT cover for personal injuries or vehicle damages. Thus, you should understand the basic inclusions and exclusions of your TP insurance before thinking about a comprehensive insurance policy.

3. Look for Comprehensive Insurance plans that will cover damages caused to you and your vehicle. There are many additional benefits that you can opt-for while selecting a comprehensive insurance policy. Most people buy a comprehensive policy in addition to the basic TP insurance.

4. Seek policy Add-ons based on your risk profile to get the most optimum protection plan. Since, every person uses their vehicle for different purposes, their insurance requirements will also be different. There is no one-policy that fits all; you should customize your add-on features based on your car’s usage and driving pattern to make the most of your insurance policy.

5. Look for bundling and voluntarily deductibles to avoid paying high premiums. You may consider buying a bundled insurance policy for all cars in the household from the same insurer to avail decent savings on premium amounts. Another way to customize your insurance policy is to opt for voluntary deductibles i.e. agreement to share the cost of repairs in a certain ratio with the insurance company resulting in lower premium for your insurance plan.

6. Perform a thorough research before opting for dealer insurance. Although a dealer may offer you an insurance during your purchase, it may not necessarily be the best option for you or the cheapest option available in the market. As a rule of thumb, never buy insurance products without comparing features and quotes from different insurance providers

7. Know the factors that affect your insurance policy premium before you buy any car insurance policy. Your premium amount is directly linked various factors, most common being:

Insured Declared Value (IDV) – Your car’s IDV is the maximum amount you can claim as per your insurance policy. It directly affects your policy’s premium amount. Newly purchased cars have higher IDV as compared to old cars of the same model and make.
Engine Capacity – The premium amount also depends on the cubic capacity (CC) of the engine. Irrespective of the make, model and age of the car, a higher CC engine accounts for a higher premium amount
Location – Your geographic location also impacts the premium amount you pay for your car’s insurance. A car of the same make and model will attract higher premium rates in Metropolitan areas as compared to semi-urban or rural areas.

In the world of insurance, nothing comes without an asterisk mark. Loaded with inclusions in bold and exclusions in fine print, your car insurance isn’t any different. Understanding the attached conditions may be complicated, but it is easy to have an idea about the most common exclusions of a car insurance policy.

What is not Covered in Car Insurance?

Below is a list of situations in which loss or damage is not included in your car insurance policy:

Driver related issues: If an accident occurs when the driver is driving under the influence of alcohol/ any other intoxicating substance, or if the vehicle is being driven without license.
Vehicle related issues: Damage to the engine caused due to oil leakage, or in case of violation of manufacturer’s guidelines causing failures or breakages.
Damages due to man-made disasters : Any loss or damage due to war, invasion, terror attacks, civil war, rebellion, hostility, radiation and nuclear weapons are not covered by car insurance.
Deliberate or consequential losses: Losses arising due to deliberate accidental events and/or as a result of a certain action are not covered under by insurer as they do not count as ‘risk’.
Contractual liability : Any claim arising out of a contract made by the insured is not covered under insurance policies. Losses are not covered when the car meets an accident while being driven by anybody apart from the insured, even if that other person is the contractual owner.
Others – Personal belongings, regular wear and tear, general ageing of the car.

Apart from the permanent exclusions listed above, there are many risks that are not covered under a standard comprehensive policy but can be included (as add-ons) by paying extra premium. With so many policy options and insurance companies to choose from, narrowing down your options is a challenging task. Although the best insurance policy for one’s car varies according to one’s needs, we can surely reduce your burden of browsing through insurance providers.

The 10 best companies to buy car insurance in India are – ICICI, Bajaj Allianz, Bharti AXA, HDFC Ergo General Insurance Co. Ltd., New India Assurance Co. Ltd., Oriental Insurance Co. Ltd., United India Insurance Co. Ltd., National Insurance Company, Edelweiss Car Insurance, and Future Generali Car Insurance. The cheapest car insurance policy (as of September 2019) is offered by Digit General Insurance, however premium rates may vary based on your car, location, and coverage.

All in all, choosing the right car insurance plan is as important as choosing the right car. It’s, thereby, inevitable to be fully geared up with valuable information before you drive into the world of car insurance.