A car is often the first material achievement of adulthood. While we all spend endless hours weighing various aspects of cars, comparing models and prices and efficiencies, we ignore an important aspect of our car’s safety—Its insurance.
Since the Indian Government has made it compulsory to get all cars insured, we simply buy whatever cheap car insurance is available in the market. With this path, it is easy to fall into the same trap year after year. We think insurance is just a piece of paper, and all policy options are the same.
While one should definitely look for the lowest car insurance premium, there are various aspects that should be considered while buying a policy.
- -> Firstly, the policy features should be selected based on the car. One’s first love may have been their father’s old Maruti, but getting the same policy features for a new high-end car, even though the sum insured will be higher, would be inadequate.
- -> The most basic form of car insurance in India is the third party policy. If the insured’s car damages another car, this policy will cover the expenses incurred for the third party’s car. It only covers losses under this category, and no other kinds of damages are covered under this kind of insurance.
- -> A comprehensive policy, unlike a third party policy, will cover the various uncertainties of the world. Every major city in the country has had torrential rains and floods in recent years. We have all seen footage of cars floating like toys in the water. Storms have uprooted trees that unfortunately fell on vehicles in the vicinity. A policy that covers damage in any of these (or other unfortunate) events, aside from loss due to collisions, is a necessity today.
- -> The features of the policy should respect the worth of the car, its age, and the cost of its repairs. If a car is beginning to get old and is likely to need more maintenance, or if it has pricey spares, a policy that provides engine cover and covers the cost of consumables is a good idea.
- -> For a recently bought car, a policy with the zero depreciation (zero-dep) feature is typically useful. It will ensure that the cost of any damaged parts will be completely reimbursed by the insurer, without deducting anything from the payable amount (on account of aging). For instance, if a damaged part costs Rs.10,000 to replace with a zero-dep policy, the insurer will reimburse the entire 10,000. But, with a normal policy, the reimbursement is lower, depending on the age of the car.
Zero-dep comes at a cost, but the cost is usually recovered if any of the key parts in the car need replacement during the coverage period. Given this cost-benefit balance, most insurance companies do not offer the zero-dep feature to older cars, which is a reason why new car owners should avail the facility in the window it is available.
- -> No Claim Bonus (NCB) is given to the insurance holder for every year without any claims and can be used to get a discount on the insurance premium. Even while changing the insurer or getting a new car, an NCB can be transferred, and a discount can be claimed on the new policy or car.
- -> Insurance companies are simplifying the claim process by creating a network of empaneled cashless garages (CG), which enable getting repairs done without paying cash upfront and without going through a reimbursement process.
While it may not be as exciting as buying a car, buying car insurance is an equally important decision, and today’s consumers should wisely choose a policy that is most suited to their individual needs.