Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

Car insurance: Safety net

Sep 07 2013, 13:44 IST
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Forget about being in an accident for a while. Consider being stranded in the middle of nowhere with no money for fuel or to spend a night at a hotel. AP Forget about being in an accident for a while. Consider being stranded in the middle of nowhere with no money for fuel or to spend a night at a hotel. AP
SummaryDonít get stuck in the confusing world of car insurance and claims. We give you tips and tricks to protect yourself better and save money while you do it

Being in a car accident is one of the worst things that can happen to you. And with the kind of unruly drivers on the road, who contribute to our dismal road safety record, every day is, quite literally, a battle. But most people drive content knowing there is the safety net of their carís insurance to pay for damages. But is just getting car insurance the only thing you need to worry about? Have you ever wondered just how well insured your car is? What if you are asked to foot a big chunk of the bill despite being insured? Have you ever read the fine print?

Forget about being in an accident for a while. Consider being stranded in the middle of nowhere with no money for fuel or to spend a night at a hotel. Did you know you can get yourself covered for eventualities like these? We bet you didnít. So, we have listed out everything you can protect yourself against. Letís start with how you can save money on insurance.

Saving on insurance

Lower the insurance premium: The premium you pay on the insurance of your car is directly related to the insurer declared value (IDV). Simply put, the IDV is the the value of the car. So, in case your car is written off, this is the amount that you will receive from the insurance company.

The IDV is calculated by the insurance company based on the market price of the model and taking into account the carís age. This value decreases by an average of 10% every year, but as the owner, you can choose to reduce the IDV and in turn reduce the premium amount. The thing to remember here is, the lower the IDV, the lower the pay-out in case of total loss.

Another way to reduce the premium is by paying voluntary excess. The excess is a part of the damage that is paid by the car owner and is a permanent part of the insurance. Voluntary excess on the other hand is the option to choose to bear an amount of repair cost in exchange of a lower premium. We recommend not going in for too high an excess. This can be counterproductive in case of an accident.

Insurance discount: Then there are some discounts that the insurance companies offer themselves. The most common amongst these is the no-claim bonus (NCB). If you have not made any claim in the past year, you get an NCB. The good thing about this is that the bonus adds up every successive year. Letís say you didnít make any claim in the first year, you get a discount of around 20% on the basic premium. This figure can go up to 45% if you donít make a claim for four consecutive years.

And it also pays to be careful about the carís security. So, if your car has an ARAI-approved anti-theft device, then you stand to benefit from an additional discount, because then the insurance company deems that your car is less likely to be stolen.

Your profession is also likely to net you some discounts. For example, a public servant is likely to drive the car less than a businessman. Doctors, defence personnel and even teachers in government-owned schools are eligible for this low-risk insurance group. Another discount available is for the members of the regional automobile associations. All these discounts, if you are aware of them, can save you quite a bit of money.

Making a claim: The NCB is by far the biggest discount that the insurance company will give you. The fact that it adds up every year and couple this with the reducing IDV of the car, implies you pay successively less each year for insuring your car. So, claiming may up the premium you pay since you lose your NCB. Of course, you should always practice safe driving, but accidents do happen and making a claim may be the only way out.

But for minor accidents, not making a claim may prove beneficial, especially if there is no mechanical damage. It doesnít cost much to remove a minor scratch using a rubbing compound or beat a minor dent back in shape. Instead, if you claim for damages, you end up losing your NCB.

Shop smart: Another way to save money on insurance is by not taking up the first offer made to you. Instead, itís better to look around and search for alternatives. You will see that premium amounts vary from one insurance company to the other. If you bargain and ask for a lower quote and higher discounts, insurance companies are likely to give you one if you show enough interest. Go online and compare quotes from different companies and ask your insurance agent to match these or better them.

Smart insurance

Most people assume that buying comprehensive insurance is the more than enough. At first, it does sound like a great deal. The car is covered for damage by natural calamities, and even the third party involved in the accident is also taken care of by the insurance policy; be it the vehicle or the driver. And you also get a personal accident cover, which is a part of the insurance scheme. So, whatís missing?

For starters, did you know that engine damage isnít covered even by comprehensive insurance? Yes. Thatís right. Parts are obviously expensive and if the car were in an accident bad enough to cause engine damage, you could be looking at a hefty bill despite the protection. When you buy insurance, ask the agent if the insurance company will foot the bill if the engine is damaged in an accident. The answer will most likely be a no.

But fret not, there is a way out. By paying a little extra you can get this important part of the car insured. What you need to check is what kind of damage is covered. Damage because of water entering the engine and oil leaks should be covered too. If this happens, the insurance company will pay for the replacement or repair of the parts, although you may still have to bear the labour costs. But the latter is generally relatively lower.

Then there is road side assistance cover. Get this and there are quite a few benefits waiting. In case of a break down, your insurance company will help you get a jump start in case the battery is drained out and even help with refills if you run out of fuel. For major accidents, the insurer will even get someone to tow your car to the nearest workshop. Some insurance companies will also pay for your taxi fare to a certain distance from the spot of the accident and if itís too late in the day, it will also take care of your overnight stay.

Another thing that you can ask for is a zero depreciation cover. When paying an insurance claim, insurance companies account for the depreciation in value of the parts. So, the amount refunded is less than the actual market value of the part. The rest is borne by the owner. In case of a zero depreciation cover, the entire cost of the parts is borne by the insurance company. Of course, this will increase your insurance premium. As we mentioned earlier, making a claim will lose you the NCB. But these days you can get away with it by having a NCB protection, which is, simply put, insurance for your bonus. It is valid under certain conditions though and will vary from company to company.

So, the next time you shop for insurance, you know what to ask for and how to save money while at the same time protecting yourself better. Remember to renew your carís insurance before the current one runs out and to stay on the right side of the law to make sure it works in your favour.

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