Buying the right policy requires basic knowledge of how car insurance works. It becomes pretty simple if you familiarise yourself with this knowledge.
The elated feeling with the purchase of a new car will remain intact for long if the car is secured with insurance. It is a widely believed myth that car insurance is an unnecessary expensive expenditure. People go for it just to comply with the guidelines set up by law.
However, just as you negotiate with the dealer for the on-road price of your car or compare various options while buying it, you can do the same with car insurance. You can buy a tailor-made policy as per your needs. But buying the right policy requires basic knowledge of how car insurance works. It becomes pretty simple if you familiarise yourself with this knowledge.
Here are some tips for buying car insurance for the first time:
Tip #1: Get Familiar with Jargons
Understanding commonly-used terms used on the car insurance policy will help you know your coverage better. So, before you begin searching for the right car insurance policy or insurance company, go through the following list of auto insurance jargons:
First-party and Second-party: The very first thing you will come across when you buy car insurance is your role as a buyer. The owner of the car, who is buying insurance, is referred to as First Party. Similarly, an insurance company which is insuring the car becomes the Second Party.
Third-party (TP): Third party is any person or an organisation who is affected by the insured car, say, in an accident. For example, during a collision, owner of the other car in question becomes the third party.
Own Damage (OD): Any damage to the insured car or injuries to the owner of an insured car is termed as Own Damage.
No Claim Bonus (NCB): If the owner of the insured car or third-party does not raise a claim in an active policy year, the owner will be entitled for a discounted premium on the next renewal. Also, it is possible to get this bonus transferred if you have sold an old car and bought a new one. Check if your insurer offers this transfer.
Insured Declared Value (IDV): The current market value of car is the Insured Declared Value. IDV includes depreciation.
Add-on/Rider: Additional coverage options available with a Comprehensive Car Insurance Policy.
Claim Settlement Ratio (CSR): The ratio of number of claims settled to the number of claim received in one year by an insurance company.
Claim: Requesting an insurance company to pay for the insured damage or compensation with respect to the purchased insurance policy.
Depreciation: Reduction in the monetary value of the car with time.
Tip #2: Understand Policy Types
Car insurance can be of two types, Third-Party Car Insurance and Comprehensive Car Insurance. Third-Party Car Insurance is mandatory as per the Motor Vehicles Act, 1988. It covers third-party liabilities.
A Comprehensive Car Insurance Policy provider a wider coverage as compared to a Third-Party Liability policy. Along with providing a basic Third-Party Liability cover, it provides financial protection for Own Damage as well.
Plus, events like theft, fire, self-ignition, natural and man-made calamities also form a part of the coverage. Additionally, you can customize a policy with the help of Add-on covers when you buy car insurance.
Tip #3: Choose the Right Add-ons
Zero Depreciation: With time, the value of the car parts reduces due to depreciation. However, with the Zero Depreciation add-on, the insurer will not consider depreciation at the time of claim settlement.
Roadside Assistance: On road facilities like towing, minor repairs, fuel, battery jumpstart, etc. can be availed with this cover.
Return to Invoice: In case of total loss of the car, the amount mentioned on the invoice will be compensated to the policyholder.
Engine Protection: Covers the cost of repairing/replacing the engine of the insured car.
NCB Protect: Helps in retaining the No Claim Bonus even after making a claim. The number of allowed claims depend upon the insurer.
Consumable Cover: The cost of repairing/replacing consumables such as nuts & bolts, engine oil, etc. is covered with this add-on.
Loss of Personal Belongings: If you lose expensive personal belongings like a smartphone or laptop, you can raise a claim under this add-on.
Tip #4: Compare Products
Before you buy car insurance online, compare insurance policies online. Choose similar type of coverage offered and compare various features offered by the company.
Tip #5: Track Renewals
Once you have bought the right car insurance policy and add-ons, you need to keep a track of the renewals. This is important as timely renewals help in getting a discount on the car insurance premium if no claim is raised against the policy. If you buy car insurance online, it will be easier to track renewals as well.
Equip yourself with the basics we shared above and buying insurance will be effortless each and every time!
(By Animesh Das, Product Strategy Head, ACKO)