Complete Guide to Buying a CAR INSURANCE

A Thread

1/ Car Insurance is a risk-sharing contract where the insurance company pays the damages incurred due to accident, theft, fire, etc. and in return you have to pay the premium.

2/ Should you buy car insurance ? In India, as per the Motor Vehicle Act, it is mandatory that all vehicles that are operated in public space must have car insurance. Without it, you can be a fine of ₹2,000 and/or imprisonment of jail for 3 years for not having car insurance.

3/ How much cover amount is sufficient ? It depends upon the current value of your car which means Insured Declared Value. IDV is the maximum amount that your car insurance company will reimburse (pay back) you in case your car gets stolen or damaged.

4/ The premium amount depends upon various factors like the age of the year, model, etc. But, the car value depreciates every year which is why the IDV also decreases with every passing year.

5/ UNPOPULAR FACT - The car insurance works on ‘Use it or lose it’ policy which means if there is no damage to the car, you will not get the premium amount back. It looks like Term insurance.

6/ To know about term insurance, checkout the following thread :- https://twitter.com/ShubhamAggarwl/status/1319116941043265538?s=20

What are the different types of car insurance ? There are 3 types of car insurance in India i.e.,

7/ Comprehensive Insurance :- It means the policy will provide the coverage amount damages to your car (own damage cover) and third party liability (TP). This policy covers the risk for both the parties i.e., your own car and another person 's.

8/ Third-Party Liability Insurance - It means the damages occurs by you to another person who is walking on pedrestain, people in another vehicle, etc. It also safeguards you from any legal liability & financial liability occurring due to your own car involvement in an accident.

9/ Note :- IRDAI pre-decides the third party liability premium in India on the basis of Engine Capacity and these are the effective prices.

10/ UNPOPULAR FACT - This policy covers death/injury/damage to the Third Party. But, the maximum damages given to third person is ₹7.5 lakh. In case of injury/death, the court tribunal will make the decision on the payout.

11/ Pay as You Drive Insurance - This policy means that it allows you to pay a premium as per the kilometers driven. It is also known as Usage based car insurance.

12/ According to us, one should always take their own car damage and third party liability i.e., Comprehensive Car Insurance.

13/ UNPOPULAR FACT - The insurance company will provide you the claim if there is damage that occurs due to natural calamities, stolen, riots, etc. But, the third party liability doesn’t cover it.

What to check while buying any car insurance policy ? Following are they and you should look all the parameters taken into consideration whenever buying any car insurance :-

14/ No-Claim Bonus - It means the insurance company provides you an incentive in the form of a discount for not making any claim. Following is the chart of discount :-

15/ For example, if you don’t make any claim in the last 1st year, the insurer will provide you a 20% discount on your next year car insurance premium amount. The more you don’t claim, the percentage of your premium keeps increasing.

16/ But, if you make a claim, the NCB or discount percentage will be zero. It’s like a video game, if you fail in 5th level, you have to start from 1st level.

17/ UNPOPULAR FACT - The benefit of No-claim bonus (NCB) is not given when you don’t renew your policy within the 90 days of its expiry. AND if you change the insurer of the policy, you will receive the benefit of NCB.

18/ Exclusions - Every insurance company has some exclusions in their policy like wear and tear, depreciation, etc. But, to avail the benefit of exclusions, policyholders have the option of add on.

So, following are the best add-on, you can opt for :-

19/ Zero Depreciation - It means whenever you make a claim, the insurance company pays the amount. But, a part of it is given by you from your own pocket.

20/ So, if you bumped the car & you want to replace the plastic part & rubber part, you need to pay 50% of the cost & if you get fiber part replaced, you need to pay 30% of the total cost & if you want to replace the metal part, you don’t need to pay anything for the 1st 6 month.

21/ But, 5% in the first year and 10% in the 2nd year of the car and so on is paid by you from your own pocket.

22/ That’s when the zero depreciation add-on helps you. It is the add-on feature on your base comprehensive policy, when added increases the premium amount by 15%. So, when you make a claim, you don’t have to worry about the huge bill.

23/ UNPOPULAR FACT - You are allowed to make maximum 2 claims in a year and it also doesn’t cover the engine protection cover, for this you need to buy a separate add-on. Also, read the exclusions of Zero depreciation.

24/ Engine Protection - It means the protection of your car engine from waterlogging. If you live in an area (like Delhi, Mumbai, Bangalore & other cities which are flooded), where the chances of waterlogging increase, you should definitely consider it to add-on in your policy.

25/ UNPOPULAR FACT - The policyholder can make only 2 claims against the Engine protection add-on. It comes with the limited validity i.e., the add-on is not available for cars older than 5 years.

26/ Voluntary Deductible (VD)- It means you have to pay a small standard amount from your own pocket on the claim made by you irrespective of how big the bill amount is. The amount depends upon the Engine capacity.

27/ It is the option available to you when you buy or renew the policy, it means you're choosing to pay the high amount from your own pocket when you make a claim. If chosen, it gives a discount on your premium amount. Higher the VD, higher the discount on your next premium.

28/ Return to Invoice - It means you get the original value of the car at the time when you bought it along with registration cost and taxes not the insured declared value (already explained above). But, the amount will be given only when the car is theft or loss of your car.

29/ This cover is highly recommended for theft prone areas or people who drive on long highways and available for vehicles up to 3 year old.

Why did the insurance company reject the claim ? Following are the reasons and you shouldn’t do these points :-

30/ Driving without proper license - If you’re driving the car and meet with the accident, but don't have a proper valid driving license, the insurance company has a right to cancel the claim.

31/ Drink and Drive - When you’re driving the car along with the influence of drugs or alcohol and meet with the accident, the insurance company will not provide you any claim. Also, if you do Drink and Drive, as per law, you can be punished and/or be in prioshment for 6 months.

32/ Delay in reporting - It means the deadline given by the insurance company when you meet with the accident, you are bound to report it before the deadline. If you don’t give the report before the deadline, the chances are that your claim will get rejected.

33/ Owner Negligence - It means if you had parked your car in no parking zone and somebody has stolen your car from there, the insurance company will not provide the claim as there is owner negligence. So, please park your vehicle in the Parking Zone.

34/ Fraudulent Claim - As the car insurance model works on ‘Use it or lose it’. Some policyholders voluntarily damage their car to get the benefit of a claim. But, if the insurance company finds that you’re doing mis-guiding them, the chances are that claim may get rejected.

35/ Driving a modified car without providing information - When you took the insurance policy, you made some declarations on car specifications like engine capacity, alloys, or others. This is what the policy will cover for you.

36/ But after some time, you got an upgrade in the car’s engine and did not intimate the same to the insurer. So, if you meet with an accident, the insurance company has the complete authority to reject the claim on the grounds of un-notified car modifications.

37/ UNPOPULAR FACT - As per the recent update from IRDAI, it is compulsory that when you’re renewing your car insurance policy, you should have a valid Pollution Under Control Certificate.

38/ Read the POLICY WORDING very carefully and ask the agent what is covered in the policy and what is not covered. Also, read exclusions of add-ons (if chosen).

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BY :- @ShubhamAggarwl