The excitement and feeling of buying a car for the first time will etched in one’s memory for a long time. While anyone who wants to buy a car for the first time will look out for models that fits their budget and later compare it with other cars, most policyholders depend on dealers to get their first insurance. Others might prefer buying insurance that is cheap.
But I would say policyholders need to do a little more research like they do while buying their car so that they get a detailed and comprehensive cover. Now with the announcement of Motor Vehicles Act one has to have mandatory insurance policy and not having one would attract heavy fines. In this article we would like to point out five rules one should follow while buying the car insurance for the first time.
While buying a car for the first time one is tempted to buy insurance from dealer itself as it would save a lot of time. But one has to go through the pros and cons before buying insurance from the dealers. Many a times policyholders get discounts on cars and the insurance from the dealer. But there are far more disadvantages of buying insurance from the dealer. One of the biggest disadvantages is that they offer insurance of only specific companies. If one wants to buy insurance, he can easily visit a web-aggregator platform and compare the products with multiple insurance companies, but when buying with dealers they will not get the option to select the insurers. Often it is seen that even premium amounts are expensive from dealers. One should look at all the above factors before buying insurance from dealers.
A motor insurance policy has three components which are third-party liability (TP that covers damage done to others), own damage (OD covers damage to owner’s vehicle), and personal accident (CPA) cover. Third-party and CPA comprise the mandatory part of the motor cover while OD cover is optional. Policyholders can also buy comprehensive insurance cover that will offer protection for damages caused to your car and self in an accident. Furthermore, a comprehensive insurance will protect your vehicle against any accidental fires, thefts, and other damages. One should not look at premiums as buying only third party insurance does not offer any cover for your vehicle or self.
Now one has to buy a long term insurance cover as following a Supreme Court order last year, IRDAI has asked all the general insurers to offer long-term mandatory third-party insurance cover. Accordingly, the third-party insurance cover for new cars will be for three years, while the cover for new two-wheelers will be for five years.
Basic policy covers accidental damages and a host of other things like loss or damage to car due to natural calamities or against man made calamities. However, policyholders should always buy add-on covers like engine protect cover, roadside assistance covers and consumable cover among others. Buying such add-on covers might increase the premiums by 15-20 per cent over the base policy as which is own damage and third party liability. Such add-ons can give huge respite to policyholders during moments of excessive flooding. Among the add-on, engine protect cover is one of the must have for the policyholder as basic car insurance doesn’t cover the damages to the engine. Such covers don’t give claims in case there damaged is caused by accident but will pay for losses if engine is damaged due to water entering in it. Other important points while buying insurance would be zero depreciation cover, which will offer full settlement without factoring in the depreciation. In case if the car meets with an accident, a zero-depreciation cover ensures that policyholders don’t have to pay anything from their pocket for the damage caused as against a normal car insurance that factors in depreciation and makes a considerably reduced settlement. Also one should look at inclusions and exclusions before buying the policy.
Before buying the policy policyholders should compare the premium rates with web aggregators and other online platform, where they can get cheap car insurance before buying the policy from the dealer. This will give a very clear picture. Buying policies from web aggregators will also save people from buying fake motor insurance policies. The menace of fake insurance policy is greater in general insurance and particular in motor insurance policy. In the financial year 2018-19 around 1192 fake motor policies were issued amounting to Rs 53.64 crore. In the financial year, the number of fake motor policy was 498 amounting to Rs 33.74 crore, which means in the last three year number of fake policies have more than doubled. According to various estimates, general insurance industry in India might be losing anywhere between Rs 3,000-3,500 crore in a year to frauds. One should not just buy policy from anyone just because it’s a cheap policy.
As on March 2018, it is recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third party cover. In other words, 66 per cent vehicles are running on the road without any third party insurance cover and the victims of accidents, including those who have died and their legal representatives are not getting compensation because the vehicles are not insured. Renewing the policy will not only pose a serious risk to one’s life but also to a family member. Imagine if insurance is not renewed and God forbid you meet with an accident, first you will not receive any claim and there will be a huge third party liability in case there are court cases. One should always renew the policy on time.
The author is the director at Probus Insurance