How will you scale back the price of renewing your car insurance? – Forbes
Car insurance is essential to financially secure you at the wheel. In addition, liability insurance for car owners is compulsory under the Motor Vehicles Act of 1988. Most auto insurances are usually valid for one year. Therefore, you will need to pay an annual renewal premium to keep the policy active. However, it is quite common for people to choose an inappropriate option to save on the renewal premium.
Saving on the renewal premium doesn't necessarily mean buying the cheapest. Such plans are always attractive, but you also need to consider whether they fully cover your car value. Before we dive into that particular part, let's get a few basics right.
Car insurance and its types
A motor vehicle insurance is an insurance of the vehicle owner against financial loss due to theft or external damage to the insured vehicle. The insurance cover is based on the conditions specified in the insurance policy.
As mentioned earlier, car third-party insurance is mandatory for car owners. The policy fulfills your statutory liability, which may arise from physical loss or damage inflicted on a third party.
Different types of auto insurance
There are two main types of auto insurance in India.
- Fully comprehensive insurance: As the name suggests, fully comprehensive car insurance offers complete insurance coverage. The insurance covers personal damage to the insured vehicle and liability. The policy covers loss or damage due to natural disasters as well as man-made disasters. It also provides personal accident protection. In contrast to liability insurance, fully comprehensive insurance is optional.
- Liability insurance: This is a basic form of car insurance that covers personal injury / damage or loss caused by the insured vehicle to someone else's property or vehicle.
Exemptions from car insurance
The insurance contract should cover emergencies or adverse effects. There are a few exceptions, however. Most of the insurance policy does not cover:
- Accidents caused by drunk driving.
- When a person who drives your vehicle is below the legal age to drive a vehicle.
- Damage caused by a driver without a valid / expired license.
- Act of willful damage to the vehicle.
- Damage from war, mutiny, or nuclear risk.
- General aging due to wear and tear on the car.
There are a few other exceptions that vary from one policy to another. You need to read the policy document carefully to know what your policy allows.
Car insurance add-ons
Insurance providers usually offer additional services if you want to further improve or expand your existing insurance coverage.
Typically, these auto insurance drivers have an additional premium and aim to improve the scope of existing insurance coverage. However, such add-ons are offered within a certain time frame since the vehicle was purchased and differ from insurer to insurer. Some of the common auto insurance drivers include zero depreciation, engine protection, consumables, etc. If you choose auto insurance drivers, review the specific insurance coverage and confirm that it meets your specific needs.
Before we dive into reducing your car insurance premium, let's look at some of the most important factors that affect insurance premium.
Factors Affecting Your Car Insurance Premium
There are several factors that affect the amount of premiums that you charge for your car insurance. Some of the key points are listed below:
- Kind of insurance: If you opt for fully comprehensive car insurance, you will be charged a higher premium amount. The reason for this is that the policy aims to provide comprehensive insurance coverage. Since stand-alone liability insurance offers standard coverage, it has a lower premium which is set by the regulator.
- Vehicle brand, model and variant: The insurance premiums differ for different vehicle types depending on the brand, model and variant.
- Regional Traffic Office (RTO): In India, the premium for car insurance is calculated based on the location of the vehicle's registration. Indian law categorizes locations as follows:
- Zone A
- Zone B
Major cities like Delhi, Mumbai, Chennai, Bengaluru, Pune, Ahmedabad and Hyderabad fall under Zone A. The rest of the country falls into Zone B. The award amount may change according to the zones defined by the RTO.
- Insured declared value: The value of your insurance policy depends on the declared insured value, i. H. IDV, from. IDV is the market value of the car or, in simple terms, the maximum coverage that the insurer can offer. When buying a new car, the declared insurance value is therefore higher because it is calculated on the basis of the list price in the showroom. However, the IDV does not remain constant and loses value over time.
- Age: Insurance companies can charge higher premiums for old vehicles if those vehicles require constant maintenance and servicing.
Below are simple ways to cut the cost of renewing your car insurance.
Ways to reduce the cost of your auto insurance renewal premium
● Understand your needs
There are many car insurance policies on the market with different premium rates. Of course, it makes sense to research various auto insurance companies to get the cheapest premium rates that offer adequate coverage. Most insurance companies have active websites and there are several online buying insurance sites to help you.
Typically, these online insurance sales platforms are easier to use than traditional offline methods. They also help you find the best premium tariffs with ease. When choosing the cheapest price, the value of the vehicle (IDV) offered by the insurer should also be checked. Sometimes insurers offer a lower IDV which results in a lower premium but could injure you in the event of a total write-off or theft of your car.
Just don't go for the cheapest option as it may not give you adequate coverage. Before doing any comparison, do your research and select the vehicle's fair value.
It is advisable to take a close look at the various optional covers (add-ons) of your basic motor vehicle insurance and to decide whether you really need them, as these usually increase your overall premium considerably. Also, you must always read the fine print of every insurance policy that you buy.
● Use the No Claim Bonus (NCB)
The primary goal of auto insurance is to save on expensive repairs and damage to the vehicle. However, making claims for small amounts could run counter to this objective. With the smallest claims, you lose the benefit of the No Claim Bonus or the NCB if you renew it in the following year. This is the bonus that is accumulated for each “no claims” year. Insurance providers offer NCB (or discount) up to 50% on the renewal premium for personal damage (OD) if no claims are made during the contract period.
The benefit offered when extending the first year is 20% discount and increases after each subsequent period by up to 50% for five consecutive years without any claims. So if your auto insurance needs to be renewed, check the accumulated NCB and include it when deciding on the insurance policy.
Incorrect information from the NCB can also lead to a reduction in your premium, but complications for your next claims settlement. So be honest and claim the discount you are entitled to based on your good driving behavior.
● Choose voluntary deductibles
A deductible is the portion of the claim that you willingly pay out of your pocket. With a voluntary deductible, the insurance has a reduced obligation to provide benefits in the event of a claim.
Therefore, depending on the selected deductible of the policyholder, the insurance grants a larger discount on its own damage premium. Note, however, that this will also reduce the amount of damage you will receive
● Renew policy before it expires
If the current auto insurance policy expires, the insurance company may refuse to grant discounts or the NCB may refuse to grant you a renewal after 90 days. It is therefore important to keep an eye on the expiration date of the policy and to renew it beforehand. You can ask your insurance company's service desk to send you a reminder before the expiration date.
In addition, you can mark the date on your calendar to be reminded in good time and to be sure to renew the policy.
● Online renewal
To renew your car insurance, you have two options: online and offline. It is often advisable to renew the policy online on the insurer's website. In such cases, you buy the policy directly from the insurer and avoid intermediaries and their commissions compared to offline mode.
It is also convenient, easy to perform, and gives you a better overview of the policy you have chosen.
There are several ways you can reduce your auto insurance renewal premium. You can choose one or more of the methods above to receive the lowest possible reward rates. The key, however, is a thorough research before choosing the right policy.
Understand that the cheapest doesn't necessarily mean the best. Furthermore, there is no alternative to safe driving practices. Driving safely with the right insurance will help you lower your premium in the long run.