Car prices in India have seen a rapid increase over the last few years. This has led to a corresponding increase in the charges of their maintenance as well as insurance premiums. In fact, the latest notification from IRDAI confirms that there may be a hike in third-party insurance premiums by up to 40%. Under such circumstances, it is important for you to know the different types of car insurance available and the factors that affect your car insurance premium.
Let’s discuss the types of car insurance premiums available and ways in which you can gain the maximum benefits at low premium rates.
Types of Car Insurance
Before finalizing your insurance provider, you need to choose the type of car insurance policy.
There are two types of car insurance policy:
- Third-party car insurance policy: Third-party car insurance policy is compulsory as per the law in India. Under this policy, you are covered from liabilities arising due to third-party damages to a vehicle or person.
- Comprehensive car insurance policy: On the other hand, a comprehensive car
- policy covers damages or injuries to the insured vehicle and the owner (own car damage) along with third-party liability.
7 Surprising Ways to Reduce Your Car Insurance Premium Effectively
Here are 7 ways to help you lower the car insurance premium amount :
1. Buy and Compare Plans Online
Before buying, it is important to get an idea about the value of your car and the benefits offered against the premium amount. It is recommended to compare quotes from at least 5 to 6 different insurance providers. Since the market is highly competitive, you may have a good chance of getting all the benefits you need at a reasonable cost. In order to promote an informed buying decision, most online brokers have an option to compare before buying.
*PRO-TIP: Third-Party car insurance is cheaper than a Comprehensive policy since its coverage is limited. At the time of comparing, make sure you have the quotes for similar coverage.
2. Multi-year policy
Most car insurance policies have a policy term of one year. At the end of the year, you will need
to renew it. In fact, missing renewal date is the most common excuse given by car owners caught without valid insurance. To deal with this problem, IRDAI’s has introduced multi-year car insurance policies. As part of this policy, you can choose the terms of your policy. The maximum term is three years for both Third Party as well as Comprehensive Cover. You only need to pay a one-time premium amount for 3 years. Since the investment is long-term, the premium rate is lowered taking into account affordability.
3. Opt for Voluntary Deductibles
You can also opt-out of voluntary deductibles to pay for minor damages. A voluntary deductible is the portion of the amount you choose to pay from your own pocket in case of any damage caused to the insured car. Depending on the amount of voluntary deductible, you can receive a discount as high as 35% on the insurance premium. At the time of opting for a higher deductible, remember to note that this is over and above the compulsory deductible you will pay, in case of an accident.
4. Invest in Safety Devices
Having precautionary and anti-theft devices installed in your car such as airbags, anti-lock brakes, etc can help you lower the car insurance premium by 2-5%. However, you can only claim this discount if the device is ARAI-certified. Just like what Hitesh did when he installed an anti-theft device in his car hence grabbed a heavy discount on his next car insurance premium from the insurer.
5. Renew on Time
Failing to renew your car insurance policy on time can lead to serious consequences. If you are caught driving with an expired policy, you will have to pay a hefty fine. Most insurance providers have set the policy term for a car insurance policy at one year. Therefore, it is best to renew before the expiry date. If your policy lapses, your insurance provider may refuse to consider the discounts and benefits you are likely to receive at the time of renewal.
*PRO-TIP: Moreover, failing to renew your car insurance within 90 days of your expiration date may result in loss of your No Claim Bonus.
6. Don’t Make Small Claims and Accumulate NCB
Another way to prevent loss of your No Claim Bonus is by avoiding small claims. A No Claim Bonus is a reward offered by your insurance provider for being a safe driver. Most companies offer a discount as high as 50% on the Own Damage (OD) portion of your premium. However, filling for a small claim can result in the loss of your NCB. Therefore before making any claims, it is best to evaluate the cost and value. Moreover, your NCB can be transferred at the time of renewal. So, if you are planning to change your insurer, you can still claim the NCB offered by your previous insurance provider.
7. Opt Only Necessary Add-On Covers
As part of a Comprehensive car insurance policy, you will have the chance to extend your coverage by selecting Add-on Covers. Since they are not mandatory, it is best to choose only the covers that fit your needs. Some common covers include Zero depreciation, Roadside assistance, Return to Invoice, Engine protection, and NCB Protect.
If you are someone who prefers public transportation, here is another option for you:
Choose the ‘Pay as You Drive’ plan
This is IRDAI’s Sandbox project and not a common offering. In fact, only a few insurers in the market are offering this experimental product. However, looking at the benefits, this product may be the future of car insurance. Under this policy, you have the choice to choose the distance (in kilometres) you expect to cover during the policy term. Just like the name suggests, you will pay for the distance travelled. The longer the drive, the higher the premium cost and vice versa. Depending on the driver’s skill, points are issued by the insurer which can then be redeemed for renewal of the policy next year.
In order to reduce your car insurance premium, it is important to understand the type of coverage and exclusions. Once you have read the fine print, it is also a good idea to compare the market price of different insurers to get an idea about the average price of car insurance for your car. There are tips and tricks to lower your premium amount but your goal should be to balance the cost with the coverage provided. Settling for a cheap plan in the short term may lead to major problems in the long run.