The Insurance Regulatory and Development Authority (Irdai) has been introducing new rules and regulations since last year, portraying the need for buying a motor insurance policy. IRDAI recently unbundled the compulsory personal accident cover (CPA) and allowed the issuance of standalone policies. The Supreme Court also made it mandatory for new cars, bikes, and scooters to have long-tenure third-party insurance. Now it has become imperative to have a motor insurance policy with a vehicle. However, most vehicles on the road still run without insurance. A recent report by COCO by DHFL General Insurance has stated that 7 in every 10 people have claimed to buy insurance after being caught by the traffic police.
The data states around 40 per cent of respondents did not renew their car insurance policy, even after being caught by the traffic police, from metros like Delhi, Bangalore, and Mumbai. The reports further stated 70 per cent respondents prefer the online route to buy car insurance. Experts suggest while opting for an insurance cover, policyholders should not only look at the price or the discount offered but also the brand, coverage offered and add-ons.
COCOBarometer, an initiative by COCO by DHFL General Insurance, was introduced to understand consumer behavior while purchasing car insurance among Indians. The report stated that 26 per cent policyholders had a lapsed policy, and claimed that their insurance company failed to remind them about the policy renewal or they just forgot to renew it on time. It was also found that the cause for the lapse of a policy was because people thought that paying the fine is cheaper than buying insurance. Experts suggest consumers are unaware of the fact that fines cost much more than an insurance policy.
If you are planning to opt for a motor insurance policy, these are the things you should keep in mind:
Third-party Insurance cover – Broadly there are two types of insurance cover: comprehensive car insurance policy and the standalone third-party liability insurance. As per the Indian Road Safety Act and Indian Motor Vehicles Act, third party insurance is mandatory. Third party insurance essentially, covers any property damage, injury or death caused to any third party. The third party could be drivers of either of the vehicles, non-hired passengers in the car, passengers in the other vehicle, or pedestrians. Additionally, the COCOBarometer also revealed that ‘third-party only’ was the least preferred policy for car insurance.
No-claim Bonus (NCB) – The insured get NCB if they don’t make small claims for minor accidents under their policy. NCB can go as high as 50 per cent for 5 claim-free years, though it varies from company to company. However, if you make a claim in between, the no-claim bonus is reset to zero which again leads to paying a higher insurance premium.
Insured Declared Value (IDV) – At the time of renewal, the insured declared value (IDV) and the premium the policyholder pays is determined. Experts suggest as this depends on the age of the vehicle, one should set the correct ‘vehicle value’ on which the policy is bought. IDV is calculated basis on how many years the vehicle has been used and depreciation which is applied to the ex-showroom price for vehicles up to five years old. The market value is taken as the IDV, for vehicles older than 5 years.
Add-ons – Various add-ons can also be opted by the policyholder, apart from the basic cover. Zero depreciation add-ons are the most popular along with ‘engine protector’ and ‘personal accident for owner’. The zero depreciation add-on helps the insured avoid paying a higher premium in the long run. However, note that add-ons also increase the premium when added to a regular motor cover.
Buy online – If you are well versed with the product, you can opt to buy a policy online. If policyholders know a policy well that they are buying, or are comfortable in understanding the product, they can buy the policy online from the insurer’s website. Experts suggest most companies offer competitive prices on their own website.