How to choose the best car insurance policy

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Let`s answer to the biggest question, How to choose the best car insurance policy?

When it comes to choosing the best car insurance policy, it can make you rumble. With a plethora of options available today, it just becomes more difficult unless you are clever enough to choose the right one analyzing all the requirements & terms & conditions of the insurance policy. In this article, we present to you a checklist which includes all the important factors you should consider to arrive at the best possible car insurance for you. Let’s first begin with the types of vehicle insurance.

Types of vehicle insuranceHow to Choose Best Car Insurance Policy

General insurance providers offer two types of vehicle insurance which are as follows-

  • Third party liability insurance – Third party liability insurance compensates for the property damages, unpredicted death & damages to the third party. It’s mandatory for all vehicles which run on the public roads within India.
  • Comprehensive Plan – This is the second type of vehicle insurance. It covers damages & losses suffered by the insured as well as any third party. Hence, it’s preferred by many people. Comprehensive plan also covers damage or theft caused by unpredicted events like cyclone, earthquake & fire explosion.

Now let’s have a look at the risk factors which affect the premium paid for vehicle insurance policies.

Risk factors that affect the premium for vehicle insurance

The risk factors that affect the premium for vehicle insurance can be grouped under four categories. They are as follows-

Vehicle related risks

Vehicle related risks refer to the fuel type, cubic capacity & other related factors of your vehicle which affects the rate of premium. For instance, certain vehicles like SUV & commercial ones often demand higher premium payouts. This is because insurance firms get a lot of claims on these vehicles. During renewal Insured declared value (IDV), diesel vehicles demand 10-15% higher premium than the petrol vehicles. The duration of the vehicle you possess & its depreciation have an important role in determining the premium to be paid. If you have used the vehicle for less than five years then the IDV is calculated based on the depreciation applied to the ex-showroom cost. This depreciation is calculated based on the usage of the vehicle within five years. However, for vehicles which are used for more than 5 years, the vehicle’s market value itself forms its IDV.

Location related risks-

Location related risks refer to the risks associated with the area of registration. Normally, you have to pay higher premiums if you stay in an urban area. If there are greater chances of theft in your area then you will have to pay higher premiums.

Claims history related-

If your vehicle insurance demands a claim then premium can also shoot up.

Driver related –

Driver related risks consider the age & profession of the driver. Premium rises if there are multiple drivers.

Now further you can browse through the tips which will help you to reduce the cost of your vehicle insurance.

Tips to reduce the cost of your vehicle insurance

Voluntary deductibles

If you voluntarily choose to settle claims yourself for minor damages then the premium is reduced approximately by 30%.

No claim bonus

No claim bonus enables you to lower your premium rates by 50% every year. This happens when you do not claim insurance for your car. Thereafter, insurance companies lower your premium rates as a reward for your record of good driving each year. When you sell your car, the no claim bonus benefit is transferred to the new vehicle’s insurance policy. Thus, you benefit from a lower premium.

Discount for security features

This facility is for those who possess cars with in-built enhanced security systems like anti-theft alarms. The probability of theft is low for such cars & hence it demands fewer premiums. However, your vehicle must be approved by the Automotive Research Association of India (ARAI) to get a 2.5% discount on the premium.

Further you can browse through the add-ons which increase the premium cost but are useful.

Add-ons that increase the premium but are useful

Nil-depreciation insurance

A nil depreciation policy offers a cover to claim for any damage with regards to rubber & plastic parts. Usually, an insurance company pays for just 50% of these parts subject to wear & tear. Most of the cars contain parts made of rubber and plastic. Hence, it will always prove to be a good option to sign a nil depreciation policy. Your premium would rise during a claim but it lowers your repairing expenses to a great extent.

Personal cover

A personal cover offers coverage for the additional users with a proper driving license and the owner himself. Personal cover also charges a nominal fee. Most companies prefer a personal cover. Hence, it’s sensible to have a personal cover.

Further we have listed some key areas where you should take prudent steps to avoid crucial mistakes.

Key areas where you should take prudent steps before you buy your insurance cover

Value of the car

It’s not advisable to reduce the insured declared value (IDV) of your car just to buy a lower premium policy. If the car suffers any mishap then your car will be considered as a total write off. Therefore, you should abstain from such practices. The right thing to do is to choose a policy which offers maximum IDV on the vehicle, even at the cost of higher premiums.

Lapse of Policy

Your insurance company may grant a week’s period in case of a lapse of your policy. After the lapse period, you are at the risk of driving your vehicle without insurance. This causes you to abstain from advantages like lower premiums & discounts for vehicle insurance policies.

Hence, now you know the important factors you should consider to arrive at the best possible car insurance for you.

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