Naman just started working a year before. Thanks to his Engineering degree from a reputed college, he could save a decent amount. ‘Why not to buy a car. It can be used for parents over the weekend. I can possibly do a car pool to manage the costs as well’ thought Naman. He partly needed to fund the car by taking a car loan and he was impressed with the variety of options offered literally by every bank. That said, soon he got confused with various terms. He was not sure which options to choose? How to reduce cost?
Thanks to the wide spread advertisement and media coverage, all of us know that we can buy a motor insurance in a jiffy or before your coffee actually goes cold. Ease of buying insurance does not mean that it is easy to navigate the various permutation and combinations and decide what is right for us. In most cases it’s just the price which swings the decision in favor of a company. We endeavor to through light on the basic motor insurance and the various optional add-ons.
Car insurance typically has two components to it i.e. Third party liability insurance: this covers liability for injuries and damages to a third person as well as property & Own Damage Cover: damage to the vehicle due to perils like fire, theft etc. are usually covered under own damage section of the Motor Insurance policy:
Policies covering both own damage and liability cover are normally referred to as Comprehensive package/Policy. While third party liability cover is compulsory as per the law, own damage cover is not. However it is advisable to go in for a policy which covers both. Premium charged for third party liability is decided by IRDA. The own cover premium is fixed by the insuring company.
When you shop for car insurance once you get the split of premium between the third party premium and own damage premium. You should look for IDV or the insured’s declared value, this is value of the car net of depreciation for which insurance is being offered. This indicates the maximum limit of the cover offered. Many times a person offering you a lower premium may be offering you a lower IDV as well. Which essentially means in case of damage or theft the liability will be restricted to the lower sum insured.
What are the various Top ups you can take?
Normally when you take insurance the cost of parts used is depreciated for the age of the car and the depreciated amount is payable as claim. This would essentially means a good chunk of the cost is actually borne by you despite having insurance, this being especially true for older vehicles. With this top up the depreciation difference is borne by the insuring company. While this top up man not make sense for a brand new car, for a car which is older this could be a handy and prudent top up.
This is normally available for damaged parts in case of partial loss of car and is available specified number of times in a year.
No claim bonus (NCB) protection cover.
If you do not claim insurance during the entire year you are eligible for a no claim bonus of 5%. The bonus is in the form of discount on own damage premium. The NCB keeps getting accumulated for every claim free year maximum NCB possible however is limited to 50%. Once you make a claim the NCB will revert to zero, with this add on your no claim bonus will be protected even if you were to make a claim. Normally this facility is restricted to retention if one claim is made in the year and is not applicable for multiple claims
24*7 spot assistance this top up provides assistance for most emergencies you encounter while driving a car. Depending on the company you may be given assistance for all or few of the emergencies listed below
- Flat tyre:
- Flat battery
- Minor repairs
- Towing facility
- Conveyance to reach home: in case of car break down close to residence (the kms covered will be mentioned) conveyance to reach home is arranged
- Accommodation: in case of breakdown of car beyond a specified distance from home accommodation for occupant will be arranged
- Loss of vehicle keys: spare keys will be picked up and delivered to you
- Fuel Assistance: either fuel on a chargeable basis or towing will be arranged in this situation
Engine protector: this normally covers damage to the engine due to accident; various specific circumstances will be clearly mentioned in the policy.