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5 Things Every Car Owner Should Know Before Buying Car Insurance

Car insurance with third party cover is mandatory in India for all car owners as per the motor laws of the country

Thursday August 27, 2020 2:29 PM, ummid.com News Network

Car Insurance Policy Tips

Car insurance is one of the most important investments to make after you buy a car. It is a safety tool that protects your four wheeler from any unforeseen loss or damages, such as third party liabilities, fire damages, accidental damages and damages due to natural calamities, manmade calamities and theft. Besides, car insurance with third party cover is mandatory in India for all car owners as per the motor laws of the country. So even if you may be confident of your driving skills and don’t want a safety shield to protect your car, you will have to purchase car insurance to abide by the law.

Buying a car insurance policy is not a child’s play. First of all, it provides safety to you and your car by saving you from any financial distress in case your car is damaged or you get injured in an accident. Moreover, it also provides you with financial aid in case a third party claim requires you to pay compensation for injuring someone or damaging someone’s property during a car accident.

That’s not all. There are several aspects and terms related to car insurance that can confuse even seasoned drivers. To help you understand how motor insurance works, here is a list of five things that every car owner should know before buying a car insurance policy:

1. If It Is Important, It Is Expensive

If you take a look at the cost of different car insurance covers, you will realize that every important or crucial cover is expensive. This happens because you will find only those covers costly that protect your car from major damages and save you from financial loss. For example, if you mistakenly hit someone with your car that leads to that person’s death, the Motor Accident Claims Tribunal may order you to pay lakhs of rupees as compensation to the victim’s family, depending on his/ her financial status. Eventually, your motor insurer will be liable to pay the compensation on your behalf costing them a big amount. As a result, the cost of third party liability insurance is usually high.

Similarly, add-on covers that are important and protect you from major losses come at a higher price. Thus, the only thing that you can do is to compare various four wheeler insurance plans and buy the best car insurance online in India.

2. Multiple Factors Affect Car Insurance Premium

The final cost of your car insurance policy depends on multiple factors. These factors determine the liability of the insurance company arising from your car and accordingly, the four wheeler insurance cost is estimated. Some of the factors that affect the premium of a car insurance policy are:

i) Car brand and model

ii) Car registration year/ age of the car

iii) The engine capacity of the car

iv) RTO or geographical location where the car will be used

v) Type of chosen car insurance cover

vi) Add-on covers to be purchased

vii) No Claim Bonus (NCB) for not making claims in previous policy

viii) Voluntary deductibles that have been opted

Remember that the factors affecting car insurance cost vary from one car to another. For example, the car insurance price of a brand-new Audi A4 will be more than that of a newly-purchased Maruti Suzuki Baleno due to the difference in the price of both cars. Similarly, other factors are also considered to arrive at the four wheeler insurance price, which may be different for different cars.

3. Higher Voluntary Deductibles Can Be Beneficial

In first glance, voluntary deductibles come across as an expense that every car owner will want to avoid. After all, you will have to share the liability of the claim amount with the insurance company while settling claims. Interestingly, the real picture is way different.

If you opt for a higher voluntary deductible, you will end up paying a lower car insurance premium. This happens because voluntary deductible reduces the liability of the insurance company and they have to pay a lower claim amount at the time of claim settlement. Therefore, when you opt for a higher voluntary deductible, your motor insurance company will appreciate your efforts by offering you a reduced car insurance price.

However, never opt for a voluntary deductible amount that you can’t afford because you will be required to pay the opted amount in case you make a car insurance claim.

4. Comprehensive Car Insurance Price of One Insurer Differs From the Other

There is always a difference in the cost of comprehensive car insurance plans available at different motor insurance companies. This happens because every insurance company has their own method or formula to assess the risk arising out of a car. Sometimes, the price difference may be very small, while in some cases there may be a difference of thousands of rupees between two insurance providers.

Therefore, every car owner is advised to compare various car insurance plans online before choosing any one. This is important because if you don’t compare prices by different insurers, you may end up buying an expensive policy with lesser benefits. On the contrary, if you compare four wheeler insurance plans online, you will ultimately buy the best car insurance online in India with appropriate benefits available at a reasonable cost.

However, the difference in car insurance price will only exist in comprehensive or own damage insurance. This is because the price of third party liability car insurance is fixed by the IRDAI or the Insurance Regulatory and Development Authority of India. Insurers do not have the freedom to alter the third party insurance price and can only put a price on any individual service that they offer.

5. You Will Pay More if Your Previous Policy Lapses

As a car owner, you must never let your existing car insurance policy lapse. This is important as motor insurance companies view people with a lapsed policy as careless and irresponsible drivers. As a result, they charge a higher premium to people whose previous car insurance policy has lapsed.

Therefore, you must always remember to renew your car insurance policy before your previous policy expires. Even if you want to switch your motor insurance provider, remember to buy the car insurance from the new insurer before your previous policy expiry date. This way you won’t have to pay extra while renewing your car insurance policy.

In Nutshell

Buying car insurance is a blessing that you give to your car. Therefore, it is important for you as a car owner to understand different aspects of a car insurance policy before you go on to buy any one. By going through the five pointers mentioned in this article, you will be able to buy the perfect car insurance policy at a reasonable price.

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