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Is it a good idea to buy Cheap Car Insurance?

January 26, 2021

Do you think someone is ever going to give you 22-carat gold for peanuts? No, right? You may get it, but the weight or the quality of the gold will vary as per the money you spent. Got it? Similarly, a car insurance policy will provide you protection depending on the premium amount you pay for. The type of insurance policy you select will decide the scope of cover and the premium amount. Still, perplexed? If yes, then let us gain clarity and understand what car insurance is.

What is Car Insurance?

Car Insurance is the contractual agreement between the insurance company and the insured. The contract comes into effect only after you pay the premium. This contract will offer you monetary reimbursements when your car has been damaged in an accident; or depending on the insurance you have opted for, provide you with financial support in the event of an accident.

The physical damage may arise from accidents, theft, fire, natural disasters, and personal accidents. Other than this, the policy protects you against third-party legal liability that relates to bodily injury/ disability/ death and property damage to any person who suffers from the accident caused by you.

In common, a car insurance policy has three types that include:

Third-Party legal liability policy,
A comprehensive package policy, and
Own damage policy.

Out of these three, third-party legal liability is a mandatory policy. Every car owner must own this policy before they use the vehicle on the road. The car owners should have a long term third-party liability policy and can buy a standalone Own Damage policy for their car. The premium for the three types of cover will vary.

Now, if you wish to have cheap car insurance, you can choose the policy accordingly.

Here is how to reduce car insurance premiums?

The car insurance premium can be reduced when you:

● Choose the insurance coverage you can afford.

Third-party legal liability cover is mandatory, so no thoughts on that. You can buy this mandatory cover and save a lot of premium for yourself. But understand that you will be covered only up to the limit you pay the premium. Be mindful when you choose the policy. Understand it this way that you own a 7- years old Maruti Suzuki. You bought just the third-party cover for it. One fine day, your car met with an accident after which the bumper was crushed to zero. The repair cost of the bumper was Rs.20,000. As per the insurance policy, you will have to bear the own-damage loss because you did not have the package policy or Own Damage cover. Just before buying car insurance, you can compute the probable premium amount by using an online insurance premium calculator.

● Select the lower IDV for your car:

Lower IDV means a less amount of claim you can get. IDV indicates the maximum amount of claim you can apply for in case of loss. Choosing the lower insured’s declared value, you limit your capacity to claim. The insurance company will not pay you even if the amount of loss is more than the IDV. For example, you get your

Maruti Wagon R 2017 model insured at Rs. 3.12 lakhs instead of the actual depreciated rate of Rs. 3.25 lakhs. In 2020, you lost your car due to theft. The insurance company settled your claim based on Rs.3.12 lakh only and not the latter amount.

● Do not choose the additional covers that come at an extra cost:

If you think you have the capacity to absorb the losses on your own, you may skip buying add-on covers. Take it this way that you did not buy any of the add-on covers. One day, the tyres of the car busted when you were on a national highway. You will have to pay for the replacement of the tyres because it is not covered under the standard car insurance policy. Also, you will have to spend money to get the car towed, get it repaired, and your transport.

● Fetch the No Claim Bonus for a claim-free year.

Try to avoid small claims like that for a dent or a broken headlight or taillight. The reason is that you can afford the repair costs of such small claims. If you apply for the claim to the insurance company, you will not be able to fetch the No Claim Bonus, at the time of renewal, offered by the insurance company.

● Choose a higher voluntary deductible applicable under the policy.

Deductible indicates the amount that will be reduced from your claim amount if there arises any. In simple words, it is the percentage of claim share that the policy owner has to bear with.

● Get an anti-theft device installed in your car.

Insurance companies provide discount benefits if you have them. The premium will be more if you do not have the anti-theft device installed. It is because the insurance company will have to pay at their expense the amount of total loss, in case of theft.

Buy car insurance online: The easiest way to reduce the car insurance premium.

If you prefer to buy the insurance policy online, it saves you a lot of premium. When you purchase car insurance online, the premium amount does not include the agent’s commission, and hence the premium is low.

You have the option to compare the quotes online, study the benefits, type, and coverages. It benefits you to use a car insurance calculator to compute the premium. These calculators are available online on the insurance company’s web portals. You can choose independently any add-on cover you think suits your requirement.

Can car insurance be cheap?

By now, you must have understood that there is nothing called cheap car insurance. The premium for your car will depend on:

The usage of the car: Your car premium will vary if it is for private use or commercial use. The third-party legal liability cover will dominate the total premium amount that depends on the usage.
Geographical Location: Your car insurance premium will be low if you live in

Tier II or Tier III cities. It is because the congestion of vehicles will be less that affects the possibilities of traffic and collision.

The type of cover you choose: If you choose the comprehensive car insurance policy, the premium will be higher in comparison to that of standalone third party legal liability.
Cubic-Capacity of the vehicle: The insurance premium for a 1000 cc car will be lesser than that of the 1500 cc four-wheeler.
Car accessories: At times the car owners modify the basic model of the car using roof rails, spoilers, gas kits, and others, they even add on audio systems with 10 inch subwoofers. The insurance premium, in this case, will vary depending on the risk impacted by the
Car safety devices: Some car owners get GPS, handle locks, airbags, anti-theft devices, and gear locks installed. The premium for such a car will be lower because you have added a layer of security to safeguard your vehicle.

There is nothing called cheap car insurance, it is just a matter of your choice.

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