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How to choose the best Car insurance Policy in India?

Updated on February 28, 2016

How to choose the best Car insurance Policy in India?

Before learning how to choose the best car insurance policy, let’s know why an insurance cover is needed for your car in the first place. Insurance policy covers accident, theft or damage to your vehicle. If also provides personal accident cover as well as third party cover. Insurance companies offer the flexibility to consumers to choose the best plan as per their individual needs

Types of Vehicle Insurance: Vehicle insurance can be broadly classified into two categories

1.Third Party insurance: This plan covers damage to property, accidental death and injury to a third party involving your vehicle. This is mandatory for all vehicles in India

2. Comprehensive Plan: Covers own damage as well as third party liabilities. Provides Personal accident cover as well.

Insurance can be claimed for damage or loss caused due to theft, accident, acts of terrorism or unforeseen natural disasters like cyclones, earthquakes etc. Similarly, when Driver (owner) is involved in accident or when third party suffers damage, insurance can be claimed. Insurance cannot be claimed in cases where the vehicle is driven by a person without valid driving license, when vehicle is driven without following manufacturer’s guidelines or when the injured person is under the influence of drugs or alcohol.

How is Vehicle Premium determined? Premium is calculated based on the risks that the insurance will have to underwrite and this pertains to

(a) Vehicle related risks: Based on Cubic capacity, fuel type (petrol or diesel) etc. Generally diesel vehicles have higher premium than petrol vehicles. Luxury vehicles like SUVs are generally charged higher premiums as large number of claims involve such vehicles. As your vehicle becomes old, premium will be adjusted to depreciation

(b) Driver related risks: Age of the driver is taken into account. If the vehicle involves multiple drivers, the premium may go up

(c) Location risk: Usually higher premium is charged for urban area/metropolitan area or areas where theft is high

How to reduce the cost of your Car insurance? :

  1. Insurance companies may offer discounts to the insured having more than one policy with the same company.
  2. Car insurance premium will increase if you add luxury gadgets like night vision devices. Eliminating such devices will bring down the premium cost
  3. No claim Bonus: You can reduce the premium if you don’t claim insurance on your vehicle. You can reduce your premium by up to 50% through this way. No Bonus claim is given as a record for good driving. This bonus will be transferred to your new vehicle in case you sell your old vehicle.
  4. Install Safety devices and get discount: Vehicles fitted with safety devices like anti-theft alarms, immobilizers etc have low probability of theft. Such Cars can be insured for lesser premium. But these devices will have to be approved by the Automotive Research Association of India (ARAI).

Don’t compromise on Personal Cover: While it’s important to reduce the premiums, you must not compromise on certain Add-ons that are highly necessary. A normal Insurance cover will include personal accident coverage for the owner, but for a small additional fee any additional person(s) who use the car can also be covered. This is included in most comprehensive insurance plans

Better to go for comprehensive insurance cover: It’s always better to go for comprehensive plans because as explained above, it covers the mandatory third party liabilities as well as damage caused to your own vehicle.

Things to remember while choosing a particular cover:

  1. Check the IDV (Insured declared Value): Often, people will reduce the IDV (Insured declared value) of the car in order to pay a lower premium. But in case of an accident, the compensation will not be adequate. Therefore always choose a policy that offers the maximum IDV, even if you have to pay a slightly higher premium
  2. Never allow your car insurance to Lapse: Some people may fail to renew their insurance after its lapses. It could be deliberate or due to oversight. In such, you run the risk of driving your car without any cover which is dangerous. You could also lose benefits like Lower premiums or discounts
  3. Ensure that the company has a High claim settlement ratio
  4. Ensure that there are no Hidden terms & conditions
  5. Company must have a good rating in the insurance industry. For example, some companies are given iAAA rating by ICRA
  6. The company must provide good customer service with a dedicated team

Apart from the above, some companies provide additional services like Towing assistance, Free car pick up and Warranty on Repairs

Compare Quotes: Before purchasing an insurance cover, obtain and compare policy quotes from multiple insurance companies. Choose the best cover based on overall factors. You could compare policy quotes through online sites like PolicyBazaar.

Top Car insurance Companies in India: Some of the top car insurance companies in India are Bajaj Allianz General Insurance Ltd, ICICI Lombard General insurance Ltd, New India Assurance Company Ltd, Tata AIG General Insurance, Bharti AXA General insurance Ltd etc


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