When it comes to buying a life insurance policy or a health insurance one, we are often confused about the quantum of cover we should buy. Experts say we should buy according to our needs and other give a mathematical formula often involving our annual income. But when it comes to a motor insurance policy, like car insurance, do we know how much insurance is needed by us?
Believe it or not but deciding on the amount of coverage for our cars is not in our hands. As per the Motor Vehicles Act, the car to legally ply on Indian roads, a motor insurance policy requires to be bought. So, whatever be the value of the car you bought, the entire value would be insured without you having to decide on the coverage amount.
Then there is another concept of the Insured Declared Value (IDV). It’s only fair that as your car ages its value depreciates. The IDV is the market value of your car after adjusting for the corresponding depreciation based on the age of the car. This value would be the value for which your car would be insured.
The Motor Vehicles Act mandates only a third party liability cover for your car while the concept of a comprehensive cover is also available in the market. So what are these covers and how do they differ? Read on:
You might not be able to decide on the quantum of car insurance cover you need but you can surely pick the type of cover that you need. The third party policy is where the premium is fixed by the IRDAI and usually depends on the make and model of your car.
Needless to say, it is the cheapest plan but has a limited scope of coverage. The premium for a comprehensive policy is fixed by the insurance company and consists of two components - third party premium and own damage premium. It is apparent that the comprehensive policy is expensive when compared to a third party one.
For those of you, who like saving money on premium outgoes, think about the cost of repairing the damage incurred on your own car. The money you save by opting for a third party policy would not be enough to meet the repairs to your own car. A comprehensive policy is always a better choice.
Deciding on your life or health cover might take some consideration and research work but deciding on your car insurance cover is the easiest. Reason – it is not in your hand. What you might decide on is the type of policy you are buying and for that the comprehensive policy wins the debate hands down, so you don’t have to spend a lot of time researching for it too.
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