Buying a car insurance has indeed become a breeze, thanks to online presence of General insurance companies you can switch, renew or buy afresh within minutes. Is the premium charged the only criteria for your choice of insurer? Cheapest premium does not necessarily mean value for your money. Hear is why.
Car insurance typically has two components to it
Third party liability insurance: this covers liability for injuries and damages to others that you are responsible for
Own Damage Cover: damage to the vehicle due to perils like fire, theft etc are usually covered under own damage section of the Motor Insurance policy:
While third party liability cover is compulsory as per the law, own damage cover is not. However it is advisable to go in for a policy which covers both. Policies covering both own damage and liability cover are normally referred to as Comprehensive package/ Policy. While the premium charged for third party liability is decamp by IRDA. The own cover premium is fixed by the insuring company.
1) The company charging you the cheapest premium may not necessarily mean value for your money
The premium charged for own cover is dependent on a lot of factors like IDV “Insured’s Declared Value”. IDV reflects the maximum amount payable by the company in case of a total loss of the vehicle. It is possible for a company to charge you a lower premium and provide you a lower IDV thereby limiting their liability in case of own damage.
Other factors which you should take into consideration for making an apple to apple comparison are deductibles and coverage. Deductible is the amount over and above, which the claim will be payable. There is a normal standard/ compulsory excess for most vehicles ranging from Rs. 50 for two wheelers to Rs. 500 for Private Cars and Commercial Vehicles which increases depending upon the cubic capacity/ carrying capacity of the vehicle. However, in some cases the insurer may impose additional excess. Higher educible reduce the premium.
2) You can port your policy from one company to another and carry forward your no claim bonus
Porting your policy from one company to another is actually simple, all you have to do is initiate the process a fortnight in advance, this is to ensure you have enough time to compare and renew without letting your existing policy lapse. No claim bonus is the discount give to you on your own damage premium for claim free year. The percentage of discount increases with every claim free year and is a maximum of 50%. No claim bonus will be carried forward to the new insurance company.
3) No claim bonus for your old car can be carried forward to your new car
This is something which most of us is unaware of, if you are upgrading you would be having insurance on your existing car which in all likelihood would be sold off. The no claim bonus that you have accumulated on your existing car can be carried forward to the new car.
The procedure is as follows. You can transfer the policy in the name of the buyer of the car and get a no claim bonus certificate or no claim bonus reservation letter from the insurance company. On producing this letter you can earn a discount on the premium. When you upgrade your car the price is substantial and transferring your no claim bonus could lead to good savings
4) Your policy can be transferred in the name of the person who buys your car from you.
The insurance can be transferred to the buyer of the vehicle, provided the seller informs in writing of such transfer to the insurance company. A fresh proposal form needs to be filled in. There is a nominal fee charged for transfer of insurance along with pro-rata recovery of NCB from the date of transfer till policy expiry. It may be noted that transfer of ownership in comprehensive/ package policies has to be recorded within 14 days from date of transfer failing which no claim will be payable for own damage to the vehicle
5) If you let your policy lapse you stand to lose out on benefits and face huge inconvenience in renewing the same.
If you let your policy lapse due to oversight or any other reason you could face a lot of inconvenience. If a lapsed comprehensive motor insurance policy requires renewal you need to fill up a fresh proposal as if you were insuring a new vehicle. The insurance company will offer the insurance only after a physical inspection of the car to check for pre existing damages which needless to say will not be covered by the insurance company. They may also charge you a higher premium or downright reject your proposal. If the policy is in lapsed state for 90 day and above you will lose out on the No claim bonus accumulated thus far. It is against the law to drive a vehicle without insurance and hence you will not be able to use your vehicle in the period when your lapsed policy has not been renewed. Any loss whether due to theft or natural calamities will not be covered in this period. It is therefore prudent to keep a close watch and renew insurance well in time to give you peace of mind.