20 Tips for First Time Auto Insurance Buyers

Thinking of buying your first automobile? Well, then auto insurance might just be the last thing on your mind. But it is important. The Indian Motors Act makes it compulsory for all automobile buyers to get their vehicles insured. Now as to why buying auto insurance is so important for you. Well, if your vehicle is insured, the auto insurance will come to your help in the case of accidental damages to your vehicle. The insurance company whose auto-insurance policy you have availed will step up to pay for the damages to your vehicle including repair costs.

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You’ll be paying the company an annual premium of course to receive the insurance benefit, but it helps in mitigating the expenditure you would have to face if you had an uninsured vehicle.

In short, you pay the company to come to your financial aid whenever your vehicle is involved in an accident, thus lessening your financial burden.

Types of Vehicle Insurance

There are two types of vehicle insurance policies

Third-party liability only policy: A mandatory policy as per the Motor Act of 1988 that has to be taken with the purchase of an automobile.

Comprehensive coverage policy: Coverage against own-damages, total loss of or damages to your vehicle caused by theft, accident, explosion, fire, lightning, self-ignition, strikes, riots, natural calamities or act of terrorism.

Top 20 Tips to First-Time Insurance Buyers

1. Do your Homework

You as a first-time insurance buyer should know all the available details of the insurance policies in the market. Find the right source online to view and compare policies basis of several parameters like low premium cost, coverage, additional benefits, claim settlement ratio, etc. Use the online car insurance calculator to find your policy most easily and quickly to match your requirement to the policy you need.

2. Knowing What’s Best: Claims Settlement

The three vital insurance claim ratios you must understand are:

  • Claim Settlement

    CSR is calculated as below
    : number of claims settled / number of reported claims + remaining claims at the beginning of the year – remaining claims at the end of year = claim settlement ratio
  • Claims Repudiation

    CRR is calculated as below
    : Rejected claims / total claims = claims repudiation ratio %
  • Claims Pending

    CPR is calculated as below
    : Outstanding claims / total claims = claims pending ratio %

    Claims data lets you analyse the insurer’s history for claims and its handling process. Keep in mind that relatively new companies in the market will have a low settlement ratio because claims that early could mean fake.

    Claims data does provide us with vital information and helps in making a final decision when choosing the product or the insurance company. If you are dwindling between two insurers who offer similar benefits, then Claims data may help you seal the deal.

3. What to know about Third-Party Insurance

The term ‘third-party’ means that the primary beneficiary of this policy is neither the insurance company nor the original insured, but a pretentious outside member affected by the actions of the vehicle and thereby the vehicle owner.

  • Third-Party Insurance offers:
    • Legal coverage and total financial assistance
    • Simple, seamless and quick process to acquire
    • Beneficial and lucrative to the policyholder during unforeseen events
  • Standard third-party insurance covers:

Accidental damages caused by your automobile that has resulted in:

  • Death or bodily injury to the third-party
  • Damages to third-party property
  • Accidental death of the vehicle’s driver/owner
  • Total permanent disability suffered by vehicle’s driver/owner
  • Salient features of the third-party insurance:
    • The claim is directly paid to the third-party or his solicitor by the insurer. The policyholder is only a nominal beneficiary in this case.
    • An own-damage cover is not applicable in third-party cover.
    • Insurance premiums under third-party do not differ with the vehicle value as is impossible to know how much the liability is.
    • Third-party liability insurance requires your lawyers’ involvement.
    • Renew or buy third-party insurance online in quick and easy steps.
  • Exclusions in the third-party insurance
    • Accidental loss, damage or liability upheld outside geographical boundaries other than specified.
    • Claims that arise due to contractual liability if individuals other than the owner or specified driver driving the vehicle.
    • Third-party incurred loss or damage due to accidents accrued from substantial loss from elsewhere.
    • Liabilities due to invasion, war or warlike operations, radioactive contamination or nuclear weapons, either directly or indirectly.

4. Understand your Buy

An insurance policy document is a legal contract that may contain technical terms that are hard to comprehend.

A thorough read of the documents before you sign the dotted line is essential if you want to avoid future confusion. Your policy document checklist:

  • Who is covered
  • What is the coverage, its inclusions, exclusions, and limitations
  • When the coverage begins and ends
  • How much coverage in terms of denomination is provided
  • How much you'll need pay for this coverage (the premium)
  • How to file a claim or report a loss

Ask an insurance expert to explain the various types of car insurance, terms and conditions, and benefits. For example, young drivers/owners get best rates under car insurance for teens.

5. Comprehensive Cover For Better Insurance Coverage

When third-party insurance fails to satisfy your need for the ideal auto insurance coverage, choose the highly-popular comprehensive insurance cover that takes care of you and your vehicle.

The policy covers damages to your vehicle as a result of incidents unrelated to accidents, collision, etc. This extensive scheme covers damages to the vehicle, legal liability to the third party, personal accident cover, and theft.

Opt for add-ons like zero depreciation cover, engine protector, accessories cover, medical expenses, etc.

6. Insurance needs Periodical Evaluation

Your insurance needs change as your life changes. Experts suggest that annual evaluation to review your insurance to assess if you need more or less coverage is necessary to make the insurance policy work for you.

Some events that require alterations to your existing insurance policy are:

  • You are getting married
  • You are getting divorced
  • You are renting a living option
  • You are starting a family
  • You are making a major purchase, a car, a house, etc.
  • You are becoming self-employed or starting a new job
  • You are selling or buying a business
  • Your income rises or declines substantially
  • You are taking care of your aging dependents
  • Your child starts college
  • You are due for retiring or planning to retire

7. Credit Score and Car Insurance

Insurers quote the most appropriate and the lowest premium rates based on your credit-based insurance score. The factors determining an ideal credit score are:

  • Your payment history, late payments and delinquencies
  • Length of your credit history
  • Types and number of credits, such as loans and credit cards

Age, marital status, ethnicity, sex, address and income are never considered when determining your car insurance credit score.

8. Personal Accident Cover

With 1214 road accidents occurring every day in India, you can never be too safe to guard yourself and your family against severe financial contingencies. Personal accident cover is as follows:

  • Accidental death from a mishap
  • Accidental partially or total disability
  • Accidental dismemberment of limbs
  • Injuries and death due to a act of terrorism
  • Monetary relief as daily payment during hospitalisation

Advantage of the personal accident plan is:

  • Can be bought as personal or family policy
  • No documentation and medical tests required
  • Low premium and wide coverage
  • Coverage is worldwide
  • Child education benefit
  • Certified and easy claim process
  • 24 x 7 Customer service
  • Legal expenses are covered
  • Double indemnity for impairment or demise when traveled in public transport
  • Funeral expenses are covered
  • Highly customisable plan

9. Bundled Car Insurance

Bundled car insurance is for more than one car in a single household from a single insurance company. This type of insurance will help you get car premiums at a discount.

10. Knowing About Compulsory Deductibles

A compulsory deductible is a minimum amount that you, as a policyholder, need to pay for each and every claim. The amount of compulsory deductible varies from Rs.50 for a two-wheeler to Rs. 500 for a four-wheeler as per the Insurance Regulatory and Development Authority of India (IRDAI) rules.

Higher deductible might be charged for an older car with a higher claim-risk. A higher deductible can also be charged in the cases of cars with bigger cubic capacities and other scenarios where the risk of a claim is perceived as big.

Compulsory deductibles do not help in lowering the car premium though.

11. Low Premium Costs Through Voluntary Deductibles

A Voluntary deductible, as the name suggests, is not mandatory. Voluntary deductibles help in lowering the car premiums. This option allows you to share the repair costs in case of a claim, so it lowers the insurance premium.

Deductibles compulsory and voluntary are only provided in comprehensive coverage policy.

12. Familiarising Yourself With Your Car’s Insured Declared Value (IDV)-

The Insured Declared Value (IDV) of any car is the maximum amount that can be claimed under an insurance policy. It is the amount you get if your vehicle is stolen or gets totally and irreparably damaged.

A brand new car has a higher IDV than a year-old one of the same model. So it can be said that the IDV is the current market value of the vehicle.

If you subtract the depreciation value from the selling price, you get the IDV. It excludes the registration and the insurance costs though. Also, the IDV of accessories needing the insurance (not the factory fitted ones) is separately calculated for an additional cost.

The insurance premium is calculated considering the factors like the IDV, the model, etc. So knowing about the IDV of a car is important.

13. Knowing About The No-Claim Bonus (NCB)

A No Claim Bonus is what you get as an additional cover if the policy hasn’t been claimed for the duration of one complete year. In case of you not claiming your motor insurance policies for a full one year, the NCB comes into play, and you get about 5-10% of the IDV as a bonus upon renewing the policies. The bonus can go up to 50% at the most.

14. The Geographical Location And The Car’s Cubic Capacity Matter

Your insurance premium costs might be higher if you live in a metro compared to the insurance costs of the same model if you were living in a non-metro or rural area. The car’s geographical location is taken into account in your premium. Plus, the cubic capacity of the car’s engine also factors into car insurance premium costs.

15. Customising Your Car Keeping The Insurance Policy In Mind

Some vehicle parts do not get coverage under your regular auto insurance policy, following the modification. Usually, they are engine parts and some other mechanical ones.

The standard insurance plans cannot be extended for every customised part. It is always better to check with your insurance agent before customising your vehicle.

16. A Cashless Option Is A Big Plus

An insurance company that provides a cashless option is a good choice as it helps in the case of emergencies and saves you from the hassle of running around for cash. However, you should not choose an insurance company just for this factor while overlooking others, but if it provides a cashless option, then it is a big plus.

17. Proximity Of Network Garages Is Advantageous Too

Checking for the number and the proximity of garages in your location is an important factor to keep in mind before choosing an insurance company. More network garages in close proximity are always good. You can ask around and get feedback to make an informed choice.

18. A Speedily Issued Insurance Coverage And Policy

One important factor to keep in mind while selecting a car insurance company is how soon it can provide you with the insurance coverage. How fast the policy gets issued should also be taken into account. Today’s technological advances have made fast services possible. As a buyer, you should make sure to choose the insurance company that does not take months to issue the policy.

19. Customer Service and Helpline

This could be considered a not that important factor to look into a company when buying a car insurance. But once you buy insurance, then the customer care and support will come into play for all you future worries regarding the aspects of your insurance policy.

The feedback of other persons will prove beneficial in learning about how strong and efficient the customer support of a company is. You could check for online reviews or ask your friends about the customer services of various companies. Check for 24x7 customer helpline facility which would help you reach out to your company in your time of need.

20. Buying An Insurance Policy Online

This is a cost-effective and a faster way to get car insurance than by normal paperwork. You can compare different policies online from one place before zeroing in on the one that best suits you. It is paperless work, and after the issuance of your policy, you can access it from anywhere.

Top 4 Auto insurances

  • Tata AIG Insurance Co. Ltd.
  • The Oriental Insurance Co. Ltd.
  • The New India Assurance Co. Ltd.
  • HDFC Ergo Co. Ltd.

Your Motor Insurance Won’t Come To Your Aid If:

  • You are under drug-influence while driving
  • Your vehicle is used for any illegal activity or any other activity that the policy does not conform to
  • You do not have a valid driving license
  • The vehicular damage happens outside India
Written By: PolicyBazaar - Updated: 01 October 2021
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