Why I Pay More Than Necessary for My Car Insurance?

You might have asked yourself this question at least once. It sure does makes sense; however, you might have made some mistake to face this situation. As per the industry experts, the car insurance plan must cost you around 1-2% of your car's value. In case your car insurance premium is going higher than that, then you must consider the factors mentioned below that affect the premium prices.

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New India Assurance

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253

Plan type

Comprehensive

Starting from

₹ 2,727

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  • Self-Video Claims
  • Reimbursement Within 7 Working Days For Non-Cashless

National Insurance

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268

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Comprehensive

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₹ 2,757

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  • Self-Video Claims
  • Reimbursement Within 7 Working Days For Non-Cashless

Bajaj Allianz

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1024

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Comprehensive

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₹ 2,868

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  • Spot Claims Upto Rs. 30,000
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Comprehensive

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₹ 2,962

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  • 6-Month Repair Warranty
  • Advance claim payment
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Oriental Insurance

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258

Plan type

Comprehensive

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₹ 3,005

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Plan type

Third Party

Starting from

₹ 2,094

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  • Covers damages to third party property
  • Covers damages to third party person

Bajaj Allianz

Cashless Garages

1024

Plan type

Third Party

Starting from

₹ 2,094

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  • Covers damages to third party property
  • Covers damages to third party person

Oriental Insurance

Cashless Garages

258

Plan type

Third Party

Starting from

₹ 2,094

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  • Covers damages to third party property
  • Covers damages to third party person

National Insurance

Cashless Garages

268

Plan type

Third Party

Starting from

₹ 2,094

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Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person

New India Assurance

Cashless Garages

253

Plan type

Third Party

Starting from

₹ 2,094

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Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person
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Above-mentioned prices are for a 7-year-old Maruti WAGON R AVANCE LXI (998 CC) registered in Gurgaon and 15 days before expiry of previous policy

1. Uninformed About the Comprehensive Motor Insurance Policy

Many people are only aware of the third-party insurance plan which is compulsory to buy as per the Motor Insurance Vehicle Act 1988. Not many are informed about the comprehensive car insurance that comes with dual benefits and add-on covers. With the help of a comprehensive plan, you can insure your car against uncertain events and have coverage by your side to pay third-party liabilities as well as your own damage. 

Also, you can customize the plan as per your needs and requirements with the help of add-on covers.

Now, to avoid paying extra on your motor insurance premiums make an informed decision by asking yourself few important questions because these questions will help you customize your plan:

  • Do you commute in your car with co-passengers?
  • Do you live in an area that is prone to natural disasters?
  • Do you have a luxury or sports car?

2. Overbuying of Add on Covers

Overbuying add-on covers is the major mistake people make while buying a comprehensive car insurance plan. This is what leads to expensive renewal in the next year. It is because overbuying the riders increases the cost of your overall car insurance plan. As we have discussed above, you must determine which rider will be most suitable for you depending on your needs and habits. 

For example, if you drive alone then buying a passenger cover is of no use to you. Similarly, if you don't own a luxury or sports car then engine cover will only be an extra expense on your pocket. 

Moreover, it is advisable to avoid buying roadside assistance cover, zero depreciation cover, and invoice protection cover for a 5-year-old car because the insurance plan wouldn't offer a desirable coverage. 

3. Underestimating Anti-theft Device 

Many people underestimate installing the anti-theft device in their car and that leads to huge losses at the time of accidental compensation. 

If you are unaware of the riders then you might have missed the major add-on covers that come with a comprehensive car insurance plan and i.e. Theft Cover. This will let your insurer compensate you in case your car or a part of your car gets stolen. Eventually, this means your car insurance premium will be slightly higher. 

To avoid the extra cost of the premium, you can install the anti-theft device in your car. The insurance provider will reward this in terms of a discount on your plan with theft cover. This will keep you secured in case of any adversity as well as it will be pocket-friendly.

4. Driving Habits Matters

There is no hard and fast rule to determine the insurance cost in the insurance industry. The more there is a risk of loss/damage, the more will be the cost/premium. This is why your driving habit is one of the factors that fluctuate your car premiums. If you happen to commute to work or anywhere more than the average person, you might require to pay a higher insurance premium pertaining to extra mileage.

The thought behind the higher rate is, insurance companies believe that the extra mile you will drive the more there will be chances of accidents. This is why, the people who drive less or their workplace is nearby to their house, tend to pay nominal premiums and even receive discounts for being a low-mileage driver.

5. You Claim History

Oftentimes people raise a claim for small damage repairs and it leads to a decrease in the claim amount. Yes, a comprehensive car insurance plan provides coverage for the third-party liability and own damage/loss, but it is always beneficial to raise a claim in severe cases. If you avoid raising a claim when you can afford the damage repair, the insurer will give a discount on the premium at the time of policy renewal.

This happens because of the No Claim Bonus feature of the policy. The NCB increases each year and can reach up to 50% if you raise no claim. When you raise the claim, the value of NCB goes down to zero. 

6. Expensive Cars Are Expensive to Insure

If you own a luxury or sports car the motor insurance policy will cost you higher as compared to the insurance for the non-sports/luxury car. It is because the repair costs and even the replacement is higher. As per the industry beliefs, luxury/sports cars are more prone to accidents as compared to family sedans. 

7. Setting the Wrong IDV

IDV stands for Insured Declared Value. IDV is the approximate market price of your car which is one of the factors that helps determine the premium for your car insurance plan. The insurance provider asks to set the IDV of your car so that they can calculate the risk and factor in other aspects to determine the cost of the plan. It is advisable to set the IDV amount equal to the current market value of your car.

This will lead to the correct of the premium. If you will set a higher IDV your car insurance plan will be expensive. If you will set a lower IDV your claim amount in the case of damage/loss will be lower.

The Final Word

People think and plan about buying a car but they often miss out on the insurance part. It is vital to make an informed decision while buying a car insurance plan to avoid extra payment of premiums at the time of renewal. The right coverage can be determined based on the factors affecting the premium and are discussed above. It is advisable to thoroughly read the terms and conditions mentioned under the policy document before buying a motor insurance plan.

Written By: PolicyBazaar - Updated: 25 August 2021
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