A Beginner’s Guide to Buying Car Insurance

With a market flooded with innumerable options, buying car insurance can be highly daunting and overwhelming, especially for a beginner. The various jargons and procedures can throw off a new-car owner. Therefore, it is imperative for every new car owner to acquaint themselves with the basic step-by-step guide to buying car insurance.

In this article, we will help you declutter the process of buying a car insurance policy. First, let us decode some important car insurance terms.

Important Car Insurance Terms

  1. Claim Settlement Ratio:The claim settlement ratio denotes the number of claims settled by an insurance company against the total claims raised in a financial year. The higher the ratio, the more reliable the insurer is.
  2. Insured Declared Value: IDV or the Insured Declared Value is the market value of your car at the time of buying the car insurance plan. It is equivalent to the sum assured of your policy.
  3. Own Damage Cover: This insures the car against the damage or loss caused due to theft, fire, accidents, natural/man-made calamities, etc. It compensates the repair/replacement costs in case of accidents and pays the sum assured in case of theft.
  4. Personal Accident Cover: This is a legally mandated cover offered to cover the owner-driver against injury, permanent disability, or death. The cover is fixed at ₹15 lakhs.
  5. Legal Liability: A legally enforceable liability that directs the insured car owner to compensate for the injury, damages, or death of the third party, in case the accident is caused by the insured car.
  6. Compulsory Deductible: The pre-specified part of the insurance claim which is to be borne by the insured car owner.
  7. No Claim Bonus (NCB): A discount given to a car owner at the time of renewal as a reward for not filing any claims during the policy term. The NCB is measured in percentages and applied on the OD premium.
  8. Endorsement: This is the process for making any changes in your policy – be it the addition of accessories or safety devices, change in hypothecation status, change in ownership, etc.
  9. Add-ons: The additional coverage that you can buy over and above the base insurance policy. Some examples include engine cover, key replacement cover, tyre cover, zero depreciation cover, etc.

Types of Car Insurance in India

  1. Third-Party Car Insurance Policy: A Third-Party Policy will cover only the liabilities arising from the injury, damage, or death of a third party by the insured car. This is the most basic coverage that you can buy for your car. The premium for third-party insurance is based on your engine cubic capacity and is declared annually by the IRDAI.
  2. Comprehensive Car Insurance Policy or Package Policy: A Comprehensive Insurance Policy offers all-round protection with Own Damage Cover, third-party Liability Cover and coverage for the injury or death of the occupants. The premium for Comprehensive plans is determined by the individual insurance providers.

How to Buy Car Insurance?

Now that you know the basic terminologies of car insurance and the types of coverage available, let us go through the process of buying car insurance:

  1. Determine the coverage: Decide what coverage you want for your car. While third-party policies satisfy the minimum legal mandate, a comprehensive plan will safeguard your vehicle from all sides.
  2. Compare the policies: With most insurers offering car insurance online, it is easy to compare the offerings from the comfort of your home. Compare the various features on offer, the add-ons offered, the simplicity of claim procedure, the claim settlement ratio, and finally, the cost of the premium.
  3. Select the provider: Select the car insurance provider that offers all the necessary coverage features at a cost-effective premium. Either go to the website or visit the nearest branch of the insurer to get detailed information.
  4. Select the mode of purchase: Major insurance companies, like Tata AIG, offer both online and offline modes to buy car insurance. Online car insurance is seamless and cheaper (low operational costs and elimination of intermediaries). It is advisable to buy car insurance online to avail attractive discounts and access all policy information at one place.
  5. Buy the policy: If you wish to buy the car insurance offline, simply visit the insurance office with copies of your Car Registration Certificate, Proof of Identity, Proof of Address, Driving License and Cash/Cheque/DD to pay the premium.
    To buy the car insurance online:
  • Go to the insurer’s website or download their mobile app
  • Select car/four-wheeler insurance
  • Input all the details as prompted by the screen
  • Be careful while selecting the IDV as it will determine the sum assured
  • Select the necessary add-ons
  • Avail any applicable discounts
  • Check all the details before proceeding for payment
  • Pay the premium as displayed on the screen
  1. Get the policy document and certificate of insurance: The insurer will send the policy document and the certificate of insurance over mail. You can choose to receive a hard copy as well. Mandatorily keep one copy in your car.
  2. Avail the Reminder Facility: Insurance companies send timely reminders for renewal. Avail this facility to ensure that you renew your policy on time and maintain your NCB.

Why Should You Buy Car Insurance?

  1. Legal Mandate: The Indian Motor Vehicles Act makes it mandatory for all car owners to have at least third-party car insurance before plying their vehicles on the road.
  2. Fines and imprisonment: The Motor Vehicles (Amendment) Act of 2019 lays down the following punishment for not having valid car insurance while driving:
  • First Offence: ₹2000 and/or 3-month imprisonment
  • Second Offence: ₹4000 and/or 3-month imprisonment

A car insurance policy offers financial protection in case of accidents, damage, or theft of the car. In the absence of an adequate insurance policy, you will have to shell out money from your own pockets to cover the costly repairs and replacements. Thus, car insurance is the perfect investment for protecting not only your car but also your finances.

Hope this article helps you to buy car insurance of your choice. Good Luck!

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