Car Insurance on EMI

Paying the entire premium for car insurance in one go is sometimes a financial strain, especially for those who buy comprehensive car insurance or own luxury/high-end cars that have expensive spare parts. However, several insurance companies have now started offering car insurance on EMI (Equated Monthly Instalment) to ease this burden. Let's explore what's car insurance on EMI, its benefits & eligibility criteria, and important factors to consider before buying it.

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What is Car Insurance on EMI?

Car insurance on EMI is a flexible payment option that allows policyholders to pay their policy premiums in smaller monthly instalments. Instead of paying the full amount when buying a policy or upon renewal, car owners can choose to pay the premium amount every month.

To offer this facility to car owners, insurance companies collaborate with banks, NBFCs (Non-Banking Financial Companies), and digital payment platforms. Depending on the insurer, EMIs may be interest-free or involve a nominal interest.

Monthly Mode Car Insurance

A monthly mode car insurance policy allows car owners to buy short-term own damage (OD) coverage on a monthly basis, either as a standalone policy or a comprehensive plan, offering enhanced flexibility. The third party (TP) component remains active for the entire policy term, which ensures continuous legal compliance.

In monthly car insurance, a new policy with a new number is issued at the end of each month. Vehicle owners can set up auto-debit instructions on UPI or e-mandates on net banking for hassle-free premium payments. The monthly mode car insurance is especially beneficial for vehicle owners seeing a flexible & affordable car insurance policy.

Have a look at the important features of a monthly mode car insurance policy:

• Coverage: A monthly car policy will only offer coverage for that particular month. At the end of each policy term, a new policy with a new policy number will be issued for the following month.
• No-Claim Bonus (NCB): If a car insurance claim is made during the policy tenure, the NCB will remain fixed for the 1st year coverage. However, the policyholder who defaults on premium payment will lose the accumulated NCB, and the next policy premium will increase. After 12 months, NCB will become 0.
• Insured Declared Value: Except for an endorsement, the IDV of the vehicle will remain constant for the renewal of the subsequent 11 policies. Standard IDV deduction will be applied from the 13th renewal onwards.
• Underwriting Guidelines: The underwriting guidelines shall remain unchanged for the car insurance policy bought under monthly mode during the 12 months.

How Does Car Insurance on EMI Work?

When you opt for car insurance on EMI, the total premium is split into monthly instalments, usually over 3 to 12 months. You can make the payment through these options:

• Credit/Debit Cards: Several insurers offer the option to convert your credit/debit card transactions to EMIs. Hence, your car insurance premium will split into monthly EMIs.
• UPI & Digital Wallets: Some fintech companies allow for EMI-based premium payments via UPI or e-wallets.
• Consumer Loans: Insurers tie-up with NBFCs to offer insurance premium financing, where you can take a short-term loan to pay your policy premium.

What are the Benefits of Buying Car Insurance on EMI?

Buying car insurance on EMI comes with the following benefits:

1. Affordability

   Some car owners might find it difficult to pay their car insurance premiums in one go, especially if they own luxury cars for which premiums are extremely high. Buying insurance on EMI makes it easier for car owners to get comprehensive car insurance coverage without straining your monthly budget.

2. Enhanced Coverage

   Many vehicle owners tend to opt for third party car insurance because of the high upfront costs of a comprehensive plan. However, with the EMI option, one can buy comprehensive coverage and even opt for car insurance add-ons, such as zero depreciation cover, 24x7 roadside assistance, and engine protection, among others, without worrying about immediate expense.

3. Easy & Convenient

   EMI-based payments are hassle-free, and car owners can choose from multiple payment options. Additionally, many insurance companies and banks provide online EMI options, which involves zero or less paperwork and reduced processing time.

4. Zero or Low-Interest Rate

   Some insurers offer no-cost EMI schemes, with no extra charges for the insurance premium. Even where interest is applicable, it is usually nominal.

5. Flexible Tenures

   Car insurance on EMI comes with flexible repayment tenures, which allows car owners to choose a duration that best fits their planning.

Car Insurance on EMI: Eligibility Criteria

You should meet the following eligibility criteria to buy car insurance on EMI:

• Employment Status: To provide you with a loan-based EMI option, NBFCs might compute your income & employment status.
• Credit Score: A good credit score implies improved eligibility for car insurance on EMI, particularly when you use a credit card or opt for EMI on a loan.
• Bank Account with EMI Facility: The bank must support transactions if you pay through a debit card or UPI-linked EMI.
• Minimum Premium: Some insurers set a minimum premium amount of Rs. 5,000 or Rs. 10,000 to avail of car insurance on EMI.

Key Things to Consider Before Buying Car Insurance on EMI

While EMI-based car insurance policies help lessen the financial burden, it is essential to keep these crucial factors in mind:

1. Interest Rates & Processing Fees
   All EMIs are not interest-free. Some banks or NBFCs may charge interest and processing fees. Hence, it is always ideal to calculate the total cost before opting for car insurance on EMI.
2. Timely Repayment
   Missing EMIs can result in penalties or impact your credit score; hence, make sure you can manage the instalments before choosing this option.
3. Plan Comparison
   Since different insurers and banks offer varying EMI schemes, you should compare them to get the best deal with the lowest cost.
4. Impact on Credit Limit
   If using a credit card, the entire premium amount gets blocked under your card's credit limit until the EMIs are cleared, which can impact your overall credit availability.

How to Buy Car Insurance on EMI?

Follow this step-by-step guide to purchase car insurance on EMI in just a few minutes:

• Compare Policies Online: The first step is to compare policies online from different insurers and their EMI options. Always choose an insurer that offers no-cost EMI plans or lower interest rates. Here's how you can easily compare different car insurance quotes and select the right plan:
• Go to Policybazaar.com and select 'Car Insurance.'
  • Provide your car's registration number or select 'Brand New Car' and proceed further to view plans.
  • Now, you will see quotes from different car insurance companies.
  • Pick a plan that best suits your coverage and budget.
  • Select add-ons for enhanced coverage and proceed towards premium payment.
• Select EMI as Payment Method: At the time of premium payment, choose the EMI option. If paying via credit or debit card, ensure the bank supports EMI conversion.
• Check EMI Tenure & Interest: Before you proceed, review the available EMI tenures and the applicable interest rates. Some insurance companies might also provide discounts or cashback on certain EMI plans.
• Make Payment & Provide Documents: Once you select the desired EMI option, complete the payment process and submit the required documents (if any).
• Policy Activation: the payment is successful, make sure that your car insurance policy is active, with its terms & conditions documented.