Things to know before buying car insurance online
Purchasing a vehicle represents a significant financial commitment. Protecting that investment requires more than just careful driving. In India, the law mandates that every vehicle owner must possess at least a basic level of protection. The process of selecting car insurance has shifted from offline paperwork to digital platforms. While the convenience of buying online is high, making an informed choice requires a deep understanding of several technical and practical factors.
Understanding the core policy types
Before comparing prices, one must understand the coverage options. The Indian insurance market generally offers three primary categories of car insurance.
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Third-party liability cover: This is the minimum legal requirement. It does not cover damage to the owner’s car. Instead, it pays for damages caused to another person’s property or for injuries to a third party in an accident involving the insured vehicle.
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Own damage (OD) cover: This policy focuses solely on the insured vehicle. It covers losses from accidents, natural calamities, and man-made disasters like theft. It does not include the mandatory third-party cover, so it is usually bought as an addition.
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Comprehensive car insurance: This is an all-inclusive plan. It combines third-party liability and own damage cover. Most experts suggest this for new or expensive vehicles because it provides the widest net of safety.
|
Feature |
Third-party cover |
Own damage cover |
Comprehensive cover |
|---|---|---|---|
|
Legal Mandate |
Compulsory |
Optional |
Recommended |
|
Third-party damage |
Covered |
Not Covered |
Covered |
|
Own vehicle damage |
Not Covered |
Covered |
Covered |
|
Theft Protection |
No |
Yes |
Yes |
The role of insured declared value (IDV)
The most misunderstood aspect of car insurance is the Insured Declared Value. IDV is the maximum amount the insurer will pay if the car is stolen or damaged beyond repair. It is the current market value of the vehicle, not the original purchase price or resale value.
As a car gets older, its IDV decreases due to depreciation. When buying online, platforms often allow the user to adjust the IDV within a certain range. Choosing a lower IDV will reduce the premium, but it also means a smaller payout during a total loss. It is vital to set the IDV as close to the actual market value as possible to avoid being underinsured.
Essential add-on covers
A standard policy might not cover every scenario. Digital platforms allow buyers to customize their car insurance using add-ons. While these increase the premium, they provide specific benefits that can save significant money during a claim.
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Zero depreciation cover: In a standard claim, insurers deduct depreciation on replaced parts like plastic or rubber. This add-on ensures the insurer pays the full cost of these parts.
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Engine protection cover: Standard policies do not cover engine damage caused by water ingress or oil leaks. This is essential for areas prone to flooding.
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Roadside assistance (RSA): This provides help during breakdowns, flat tires, or fuel exhaustion.
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No claim bonus (NCB) protection: This allows a policyholder to retain their discount even after making a single claim during the policy year.
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Consumables cover: This pays for items like engine oil, nuts, and bolts, which are usually excluded from regular claims.
Factors influencing the premium
The cost of car insurance is calculated based on specific data points provided during the online application:
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Vehicle age and model: High-end luxury cars or SUVs have higher premiums.
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Geographical location: Tier 1 cities with high traffic density often see higher premiums compared to smaller towns.
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Engine capacity: Third-party premiums are fixed by the regulator based on the engine's cubic capacity.
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Safety features: Installing ARAI-approved anti-theft devices can lead to a small discount.
Claim settlement ratio and network garages
When comparing companies online, price should not be the only factor. The Claim Settlement Ratio (CSR) represents the percentage of claims the company has paid out of the total received. A higher CSR suggests the insurer is more likely to honor legitimate claims.
Additionally, access to a wide network of cashless garages is vital. If the insurer has a tie-up with the repair workshop, the owner does not have to pay the bill upfront. The insurance company settles the bill directly with the garage. Before finalizing a policy, the buyer should check if their preferred service centers are part of the insurer’s cashless network.
No claim bonus (NCB) explained
The No Claim Bonus is a reward for safe driving. If a policyholder does not make any claims during a policy year, they earn a discount on the premium for the following year. This discount starts at 20% and can go up to 50% over five consecutive claim-free years. The NCB belongs to the individual. If a person sells their old car, they can transfer the accumulated NCB to the new car insurance policy.
Common pitfalls to avoid
Buying online is fast, but rushing can lead to mistakes:
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Incorrect information: Entering the wrong engine or chassis number can invalidate the policy. Always have the Registration Certificate (RC) handy.
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Hiding previous claims: Disclose previous claims accurately. Failing to do so to get a higher NCB discount is considered fraud.
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Ignoring exclusions: Most policies will not cover damages if the driver was under the influence of alcohol or if the vehicle was used for purposes other than what is stated in the policy.
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Policy expiry: Driving with an expired policy is illegal and leads to a loss of the NCB if not renewed within 90 days.
Conclusion
Digital platforms have made it easier to compare plans and read reviews. The focus should be on the balance between a fair price and comprehensive protection. By paying attention to the IDV, choosing the right add-ons, and verifying the cashless garage network, a vehicle owner can ensure their car insurance provides genuine financial security.