Five things you should know while buying car insurance

Buying the right car is important, but so is buying the right car insurance. Here are a few things to know about while buying car insurance

Bindisha Sarang September 27, 2012 15:08:42 IST
Five things you should know while buying car insurance

Festival season is here. It is the time to buy your dream car with companies raining discount offers and banks cutting loan rates. Along with the car, comes shopping for car insurance. Buying the right car is important, but so is buying the right car insurance. Here are a few things to know about while buying car insurance.

Types of insurance: Generally speaking, there are two types of car insurance policies. First is third-party liability, which is mandatory in India. The second is comprehensive insurance, a.k.a own damage. It is better to buy comprehensive insurance because this covers third party liability, personal accident and liability and theft. It will also pay for the damages of your own car due to accident. Of course, this policy will cost you more than the mandatory third-party liability, but it's worth it.

Five things you should know while buying car insurance

No-Claim Bonus (NCB): When you buy a car insurance, the policy documents mention a no-claim bonus. Reuters

Add in covers: Your agent may also try to hard sell additional covers. Buy them only if you feel the need to. For instance, with a depreciation waiver cover, you can claim the full claim amount on the value of parts (plastic and metal) that are being replaced. The depreciation amount does not get deducted. Other examples add-on covers are those for windshield glass, loss of personal belongings etc.

No-Claim Bonus (NCB): When you buy a car insurance, the policy documents mention a no-claim bonus. If you don't make any claim, the insurance company will offer you a discount on the premium for the next policy year. The discount can be anywhere between 20% to 40% (at times, even more) on own-damage premium amount. Let's say, your own-damage premium amount is Rs 10,000. So if you don't make a claim, next year you could get a discount of 25% as no claim bonus and the premium will falls down to Rs 7,500. The best part is that no-claim bonus gets accumulated over years provided that there is no break in the policy.

Voluntary Excess: Simply put, voluntary excess is the amount you are ready to absorb (pay out of your own pocket), when you make a claim. When you choose a voluntary excess option, you can easily decrease the premium on own-damage up to 35%. But how do you decide this amount? Experts say the voluntary excess should be less than the NCB amount you are eligible for next year.

Shop Around: There is a good possibility that your car loan provider itself would offer you a car insurance cover. However, it is not mandatory to buy car insurance from them. Don't simply settle down for the car insurance the dealer offers, check other options as well. In fact, more often than not when you shop around you can easily save up to 20% on the premiums. Window-shop across channels--dealers, agents and online. Online research should be done on insures' websites or insurance comparators' websites. Also, bear in mind that buying a policy online is cheaper. Do, compare what your car dealer or car loan lender is offering against what's available in the market, before deciding.

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