4 Crucial Questions to Ask Before Buying Car Insurance
The car insurance sector is a market of promises. Each new policy offered only seems better than the previous one. So how does one really discern which policy is best suited for oneself? Read on to find out!
Different plans come with different features and at various prices and the best way to find a good package that combines all your requirements in one can arrive at one answering the following four questions –
1. What is the insured declared value of my car?
The Insured Declared Value (IDV) is the maximum amount that the insurance company will pay as a claim amount in case of damage, theft, or total loss of the insured’s vehicle. In simple terms,
IDV = current market value of the car – deprecation
IDV consists of the value of the car including the accessories fitted but does not cover the cost of registration or insurance of the vehicle.
The make and model of the car, city of car registration, the age of the car, and standard depreciation help one estimate the IDV of the car. Calculating this is of value as the IDV of the car is directly proportional to the car insurance premium, implying higher the IDV, the higher the premium.
Efforts must be made to get an IDV closest to the market value of the car. Lowering the IDV just to lower premium rates might prove counterintuitive as the compensation amount will not be commensurate with the costs incurred.
2. Is there a voluntary deductible limit? If so, how much?
A voluntary deductible is a portion of the claim amount that the insured agrees to pay out of his/her own pocket. It is a common misconception that this voluntary deductible is to be paid even before the claim is lodged. As a matter of fact, this amount will be deducted from the total repair cost by the insurer after the claim is processed. This amount is predetermined and is decided by the insured.
The amount so decided is important as it has an inverse relationship with the premium that is to be paid – higher the voluntary deductibles, lower the premium payable.
Therefore, the insured must find out this cap on voluntary deductible at the time of registering the policy. There is no standard prescribed by the Insurance Regulatory Development Authority and it differs from company to company.
3. Do you need my previous claims history?
One’s claims history has a direct impact on two aspects of the insurance policy – the insurance premium and No Claim Bonus (NCB). More the number of claims made against the policy, there is an adverse effect on the insurance premium. Also, NCB will start from zero after a claim is made. Thus, to enquire if the requirements of claim history records are demanded by the insurance company before giving the policy becomes essential.
4. What add-on covers can I buy?
The add-on covers are what clearly distinguishes one policy from another. Insurance companies may offer a range of add-ons such as zero depreciation cover, consumables cover, return to invoice cover, engine and tyre protection cover, roadside assistance, passenger cover etc.
You must opt for a policy that caters closest to all your needs. Generally, there are no limits to the number of add-ons that can be purchased, but it is advisable to choose only those add-ons that enhance one’s coverage. Suppose, if you are someone who lives in a flood-prone city such as Mumbai or Kerala, you should opt for an engine protection cover. Your insurance company should allow you to add this cover into your basic policy.
There is no substitute for thorough research and due diligence before purchasing a motor insurance policy. It is natural that you may come across in numerous considerations that must be kept in mind before purchasing a policy. But the key takeaway of this article is to keep these considerations minimal and to assess the policy on the most relevant considerations which minimise costs and maximise benefits.