Buying car insurance is more than just fulfilling your legal duty as a car owner. Car insurance gives you a number of benefits – it acts as your financial safeguard from any loss or damage to your car due to an accident, natural calamities and man-made disasters such as floods, earthquake, fire, riots and even in case your car gets stolen. It also covers your financial and legal liability in case of any third-party loss or damage caused by your car in an accident.
To guide you in your car insurance buying process we have for you this essential check list.
7 Essentials to Check When Buying Car Insurance
The very first point on your checklist while buying car insurance should be to understand the types of car insurance plans that are offered by insurance companies. This will help you to make an informed decision basis your requirements.
Third-Party Car Insurance: As per the Indian Motor Vehicles Act of 1988 it is compulsory for all car owners to have third-party car insurance. This is a basic plan that covers you for third-party legal liabilities only. So if a third-party suffers injury or death or damage to their vehicle or their property due to your car, your insurance provider will pay the compensation.
Comprehensive Car Insurance: Comprehensive car insurance is much wider in scope and offers greater coverage. It combines third-party liability as well as own-damage cover which includes damage to your car from an accident, natural or man-made disaster or theft. It also offers you the choice of add-on covers to further extend your coverage.
The maximum sum assured fixed by the insurer is the Insured Declared Value or IDV of your car. IDV in car insurance is the amount you would receive if your car gets damaged, stolen or lost. Insurance companies fix the IDV for the tenure of the car insurance policy, based on the manufacturer's selling price of the car minus the depreciation value of the vehicle parts. Ensure that you do not set the IDV higher (will increase your premium) or lower (will give you lesser claim amount) than your car’s market value.
The coverage of your car insurance is basically what all is included in your car insurance policy document for which you can receive compensation. Also make it a point to understand what is not covered in your car insurance policy. Read the list of exclusions in your policy document to avoid a situation where you make a wrong claim for something not included in your policy. For example, if you were to make a claim for damages to your car in an accident, but your car insurance had expired at the time of the accident, then your claim will be rejected. That is why you should take the time to read the policy document thoroughly.
Add-on covers are offered by insurers to extend and strengthen the coverage of your car insurance policy. Add-on covers are optional that you can take with comprehensive car insurance by paying an additional premium. They can prove quite beneficial and cost-effective in the long run if you make a claim. Buy only those add-on covers that you need while purchasing comprehensive car insurance. Zero depreciation, no claim bonus (NCB), 24x7 roadside assistance, engine protector, accessories cover and personal accident cover for passengers are some of the add-on covers you can consider to give your car extra protection.
When buying car insurance you should also know the factors that affect how your car insurance policy premium will be calculated by the insurance company. A higher or lower premium amount depends on these factors. Some factors are within your control such as the type of car you buy, its engine cubic capacity (cc), age of the car, value of the car, the add-on covers opted for, No Claim Bonus (NCB) and the Insured Declared Value (IDV) of the car. However the driving location where your car is registered may not be in your control to change. A high vehicle density and theft-prone location will increase the premium.
Since an emergency situation can take place anytime and anywhere, check that your car insurance provider has a wide network of garages across the country that offers cashless service in an emergency when you raise a claim. This is very useful if you were to need major repairs or replacement of your car parts after an accident.
Check online and compare the Claims Settlement Ratio (CSR) of various car insurance providers. CSR is the percentage of claims paid out by the insurer. Knowing the claims settlement ratio will help you decide which car insurance company is the most dependable in terms of settling your future car insurance claims.