Most of us may not be aware of what car insurances entail and may find the process to be a bit complex. Here is a comprehensive guide about the facts of car insurance that you would want to know.
Often you must have heard experts asking you to buy as much coverage for your car as you can afford. Buying online car insurance won’t be helpful unless you are aware of the basics of car insurance. Knowing the basics would also help you identify the coverage that you can skip for your car.
How does car insurance work?
The car insurance policy works on the basis of “use it or lose it” system. You buy the car insurance and pay a yearly premium towards the plan. If you haven’t claimed the amount, you can get a no claim bonus next year. The NCB is quite a substantial amount which allows almost 20% discount on premium in the first year and 50% in the 6th year.
Here are the key things that every individual should be aware of before buying an online car insurance plan.
- Choose the policy according to your needs
There are two types of online car insurances available – third party car insurance and comprehensive car insurance. While the third-party car insurance only covers the third-party perils, comprehensive car insurance policy covers damages to third-party as well as to your own car. However, third-party car insurance is mandatory as per the Motor Vehicles Act of India, one can choose only to buy third party car insurance or comprehensive insurance if s(he) also wishes to cover the damages to own car.
- Set the right IDV
IDV (Insured Declared Value) is calculated as manufacturers listing pricing – depreciation.
The policyholder would need to give the IDV value only if he buys the comprehensive insurance policy. The insurer considers the IDV value for coverage amount in case the vehicle suffers heavy damage or a complete loss due to theft.
To set the right IDV value is paramount before finalizing your insurance as setting too low IDV would decrease the claim amount and too high IDV would raise the insurance price.
- Choosing the higher deductible reduces claim amount
The deductible is a small amount paid by the policyholder to the insurer at the time of settling claims. The two kinds of deductibles are compulsory deductible and voluntary deductible. Only voluntary deductible allows you to choose the amount you would be willing to pay at the time of claim settlement. Safe drivers generally select a higher deductible, but this also reduces the claim settlement amount.
- Only select the add-ons that would be useful
If you decide to opt for comprehensive car insurance, you will get the option to choose add-on or additional coverage for your vehicle. It would be wise to choose the add-ons that your car would need the most as this will raise the price of your insurance.
- On-time renewal of policy retains the NCB
Renewing your car insurance on time would help you to keep the NCB (No Claim Bonus) active. Failing to keep your policy active at all times would lead to loss of accumulated NCB and is a punishable offence.
Here are the few basics that every individual should know before purchasing any insurance policy. Remember to go through the terms and conditions of the plan before finalizing over one.