has grown in popularity over the years thanks to growing awareness and options on offer for protective coverage. While a majority of car owners today make sure they opt for a comprehensive cover over and above the mandatory third party insurance, there are still common misconceptions about car insurance at large.
We bust some of the common myths associated with car insurance
so that you can take informed and smart decisions while buying.
Myth 1: Comprehensive insurance is unnecessary
While third party insurance
is mandatory for all vehicles as per the Indian Motors Act, many insurance seekers mistakenly believe that taking a comprehensive insurance is unnecessary and waste of money.
The fact is that third party insurance
offers protection for legal liabilities for damages incurred to any third party or third party property only. No claim can be filed for any damages to the vehicle or its owner-driver. Third party insurance also cannot help in the event of car theft, hence a comprehensive insurance offers a broader cover, rendering your car insurance plan more protective.
Myth 2: Only the driver is liable in the event of an accident
The owner of the car is as much liable for any damages caused to a third person individual or property in the event of a car accident. The legal liabilities do not end with the driver. As a car owner, opting for a comprehensive cover can provide a personal accident cover for both the car owner and the driver.
Myth 3: Comprehensive insurance covers everything
A comprehensive insurance
is much broader in terms of protection compared to third party insurance. Yet, it has many exclusions. To make sure you are covered effectively as per your needs, read the policy terms and conditions to know about inclusions and exclusions. You can also choose to opt for additional add-ons for a broader coverage as per your perceived risk factors.
Myth 4: Car color is linked with insurance premium
Many car owners believe that the color of their car is linked with their insurance premium. Fact is, cubic capacity (CC), the vehicle make, engine type, geographical location, etc are the parameters linked to the insurance premium costs, not the color of the vehicle. So, the next time you hear the notion of a red car being expensive in terms of insurance, know that everything from the make, model, body type, engine size, and age of the vehicle is connected to your car insurance premium, but not the color.
Myth 5: You have to pay upfront and then seek claims in car insurance
Unlike in the past, today many car insurers
offer cashless repair at their networked garages. Effectively, this means that you only pay for what is not covered under your policy and the rest is paid directly by the insurer to the dealer, without your having to bear any costs.
Myth 6: Car insurance has nothing to do with your credit score
Before offering any insurance, insurers do check on the credit score of the individual to ascertain the financial health of the individual. So buying a car insurance policy
is not entirely independent of your credit score as many insurance seekers like to believe.
Myth 7: Getting car insurance is a cumbersome process
Car insurance can now be bought online with the click of a button. The emergence of various insurance broker now allows you to compare car insurance quotes from multiple insurers at a single platform, pay the premium for the chosen policy online, and ensure protection for your car – all in minutes.
Myth 8: Transfer of car insurance can result in loss of NCB
While transferring your car insurance in the event of selling your car, the no claim bonus gets retained with you as an individual and as the policy holder. NCB is not policy-centric but is linked to you as an individual. The car insurance company
seeks any additional funds in premium from the new owner to whom you transfer your car insurance while offering you the NCB advantage.
As an insurance seeker or policy holder, know your facts and rights. They may come in handy while dealing with your car insurance policy and related processes.
Important terminologies of Car Insurance
Buying a car is one the defining moments in life for most consumers. With the easy availability of finance and car manufacturers trying to outdo each other in offering enticing options, millions of cars are being sold in India annually.
However, every car that gets on to the road has to have insurance. While it's mandatory to have your vehicle insured as per the Motor Vehicles Act, it can get very confusing for insurance buyers as the process and the industry is riddled with jargon and acronyms.
It’s important to understand various terms used by the insurance agent, broker, or by the insurer so that you can make an informed decision.
We decode some of the terminology used in the insurance industry.
First party and third party
The most frequently used terms in the insurance industry
lexicon are ‘first party’ and ‘third party’. It thus becomes important to know the difference between first party and third party insurance.
It’s mandatory as per law to have at least third party insurance but you can also go for first party option.
The ‘first party’ means the insured person (you), the ‘second party’ is the insurance company, and the ‘third party’ is any other person.
In a first party policy, you are compensated for any loss caused by you or the third party to your vehicle, but in a third party policy any damage done by you to the other party (including legal liability) would be compensated by the insurance company and you would get no compensation for damage or loss incurred.
This is the liability that arises out of any loss or damage, whether to life or property, that is incurred by anyone. Since it is legally enforceable, it’s called legal liability. Third party insurance covers such legal liability, hence it is mandated by law to have in place for all vehicles.
As the name suggests, it covers everything under the sun from accidental damage to the vehicle, earthquakes, fire, riots, theft, etc. However, unlike third party insurance, it is optional. If you do go for it, it will cost you more, but its recommended to take this cover since third party insurance is inbuilt in this and is thus offers broader cover.
Insured Declared Value (IDV)
In a nutshell, it is the maximum amount you could get in case of a claim. It is decided at the time of commencement of the policy and keeps changing every year as you go for renewal as the value of your vehicle depreciates annually.
The insurance company protects itself against frivolous and frequent claims by making the policyholder shoulder a small part of the damage or loss. Usually, it is less than a few thousand rupees. You stand to get nothing if your claim is below that amount.
No claim Bonus
If you have not made any claim in the expiring year on your first party insurance, the insurance company rewards you by giving you a discount on the premium due. The higher the number of claim-free years you have, the higher the discount you get, which can go up to 50% of your premium.
If you voluntarily opt to pay a part of your claim if and when such a claim arises, then the insurance company gives you a discount on your premium. It comes in various slabs and you can opt the slab you want.
Any change, whether of ownership or any addition of accessories, is done by the way of endorsement in the policy document. An endorsement certificate and modified policy document will be issued by the insurer.
reak in Insurance (Policy Lapse)
If one forgets to renew the policy it lapses and no claim would be compensated. To renew the policy the vehicle needs to be inspected again and then the company would accept premium payment. The policy would be in force again.
Personal Accident Cover
The insured (vehicle owner) or the driver is covered for loss of life or permanent total disability due to accident while driving the vehicle. The standard personal accident cover offered is upto 2 Lakhs, but the coverage can be increased by payment of additional premium. Other passengers could also be covered by taking additional accident cover.
Add on cover
One can opt for additional covers and benefits apart from the standard ones offered by the insurance company. Some common options available are depreciation waiver, engine Protection, no claim bonus cover, key replacement cover etc.
These are the most commonly used insurance terms.
Apart from these, there are other specific terminologies, insurance add-on features, and options, most of which are easy to understand if you have these basic terms under your belt.
Useful Tips to Buy Car Insurance
Buying car insurance
in our country is a car owner’s mandate. It is a precautionary measure against any financial liabilities that might arise from accidents that the insured vehicle might have caused or be an unfortunate part of. While ‘third party insurance’
is compulsory by law, getting a ‘comprehensive insurance’ for your vehicle with suitable add-ons is always advisable.
Before you wear that research hat of yours, go through the following useful tips that would aid you in buying a great policy for your dream car.
a) Know your coverage types
Even if you are buying a single policy for your car, a number of components should be considered as it decides the final cost. Injury liabilities, property damage liabilities, medical expenses along with protection from theft, vandalism, fire, flood, wind and other non-accidental causes will sum up to your cost of buying a comprehensive insurance for your car.
b) Know your vehicle type
Depending on the type of four wheeler you own, the insurer will set the policy prices. If you own a high end SUV or a fancy sports car, you will obviously end up paying higher premium. How expensive the vehicle is to repair and service, including accessories, parts and labour costs can also affect the price of your policy.
c) Owner of the vehicle
Now these factors are beyond your control, but then one should know that factors like age, gender and driving experience matter a lot while deciding on the insurance premium. So, basically a middle aged man having a riding experience of less than a year might end up paying more premiums as compared to one having more than 2 years of riding experience and aged between 35-40 years.
d) Raise the deductible
Your auto insurance premium
can be reduced by increasing the deductible component, which is what you end up paying when a claim is made. It is advisable to pay only as much as one can afford, else paying too much defeats the purpose of insurance.
e) Transfer your bonuses
In case you don’t make a claim; you will be entitled for a no-claim bonus for every consecutive claim free year. Many of the policyholders are unaware of the fact that auto insurance is linked to the policy buyer and not to the vehicle. The accumulated bonuses can be transferred to the next car you buy, so when you sell your car retain the insurance in your name.
f) Compare Premiums Online
Most of the insurers now offer online services, there are online broker too, where you can compare all the available brands and their benefits. Don’t get fooled by free insurances provided by auto firms, they are typically for the first year and cannot be customised to your needs. Buying insurance online
also saves time, offers discounts, and avoids nagging salesperson/brokers.
With so many choices available for car insurance, make an informed decision after indepth research. Be it public company or private company, first be clear on your requirements. Private insurers may come up with value added services like roadside assistance, wider garage network for cashless repairs, towing services etc. Make sure how does it effect your premium. Additionally personal accident cover of passengers and drivers are also available, a good way to secure people who travel with you. Be truthful in your declaration on the proposal form to avoid any future ambiguity while making your claims.
With many incorrect information in the market and aggressive brokers, it is always recommended to have everything in writing and get it cross checked before zeroing on to a particular policy for your car.