A Simple Guide to buying Motor Insurance

2016-05-05 14:25:00 UTC

motor guide 1

In this post we talk about buying motor insurance. This is the form of insurance that most of us are familiar with and exposed to; it is almost impossible to buy a vehicle without getting insurance. Most vehicle policies are valid for a year (although some are valid for 2 or even 3 years), which means, about a year after you have bought your car or a bike, it’s time for you to renew your policy again. Like we’ve mentioned before, while buying insurance, a broker is generally the best option as ideally he represents the customer (as opposed to an agent, who represents one particular insurer).

The Government of India has made Third Party liability(TP) cover mandatory for all vehicles. In short, TP covers any damage you might cause to other parties while driving. Own Damage(OD) covers you for any damage that might happen to your vehicle (or its passengers). Comprehensive Cover is essentially a combination of both covers. The bulk of your insurance premium is your Own Damage component. For more details on TP and Comprehensive insurance covers, click here.

In this guide, we provide a basic guideline based on the age of your car.

Age of Car >=6 years

If your car is more than 6 years old, purchase a third party liability only(TP) policy.

Every insurance policy has something known as Insured Declared Value(IDV) which defines the amount at which the insurer values your car. In case of a total loss scenario, the insurer will pay you around 75-80% of the IDV. The IDV value decreases as the car gets older, to the point that after 6 years the car’s value drops to 30-40% of original price. In such a scenario, you are better off buying only third party cover, which protects you from any damage you cause to other cars/property/people on the road. Any damage to your vehicle, you will have to pay to fix yourself, which for an older car won’t be very expensive.

Choose a broker or agent who offers free roadside assistance (or RSA) as a service. This will help you in case your car breaks down while you’re on the road. You can then take out a separate personal accident cover to indemnify yourself and your loved ones against injury/death. Remember, TP cover doesn’t protect you, your passenger(s), or your vehicle in case of damage, it covers any damage you may cause to other parties.

3 years<= Age of Car <=5 years

If your car is between 3 and 5 years old, we suggest you purchase a comprehensive policy with the following add-ons (if available):

  • Road Side Assistance(RSA)

    • RSA provides tow services if your car breaks down while you’re driving it.
  • No Claim Bonus(NCB) protection; if you have a high NCB.

    • NCB is a discount you get on your premium for not having made any claims in the preceding years.

    • For more details on NCB, click here.

  • Depreciation Cover

    • Depreciation Cover protects you from problems caused by wear and tear on your vehicle’s parts (tyres are not covered).

    • If you have not filed a claim in more than 3 years, you have a great driving record and you can opt out of a depreciation cover.

    • If you have a history of claims, it is safer for you to take the cover.

    • Some insurers do not offer depreciation cover for vehicles older than 5 years.

Age of Car < 3 years

If your car is less than 3 years old, purchase a comprehensive policy with the following add-ons:

  • Road Side Assistance

  • Depreciation cover (if applicable)

  • Tyre cover in the event that you have purchased an expensive car (you don’t want to end up paying out of your pocket to replace those rims)

  • Engine protector (covers accidental damage to engine)

Additionally, if you live in areas that are prone to floods (or has a history of flooding), make sure that you purchase the hydro-static lock add-on that protects you from accidentally starting your car when your engine is flooded with water. In many cases, engine protector cover also provides a hydro-static lock. But it is always worthwhile to check if the exact benefit of hydro-static lock is clearly explained in unequivocal terms.

Our website also has a helpful motor calculator, to help you get a recommendation based on your existing vehicle, policy, and driving pattern

This is a rule of thumb of sorts to vehicle insurance. The various benefits and cost saving features(such as NCB) merit separate posts on their own, so watch this space for more!

motor guide 2