The liability insurance premium will increase from today, here’s how you can still save money
The third-party premium for auto insurance is set to rise after a two-year gap starting June 1.
Liability insurance coverage covering liabilities arising from accidental damage, injury or death to third parties is mandatory for anyone who owns or drives a motor vehicle in the country. The liability insurance premium for vehicles in each segment is decided by the central government or the Insurance Regulatory and Development Authority. Therefore, insurance companies will not be able to make any changes to this amount.
Currently, the civil liability insurance premium must be paid for five years in the case of a two-wheeler and for three years in the case of a car from the moment of purchase of the vehicle.
Auto insurance premium is a big expense for vehicle owners every year. The liability insurance premium is only part of this amount. The comprehensive insurance cover will also include the premium for a comprehensive policy which will cover own damages due to accidents, natural disasters or theft. Most of the time, this component of the insurance premium is higher than the third-party premium. Although full coverage is not required by law, it is a necessity. When you buy a vehicle on loan, you cannot avoid full coverage. Customers are given some leeway in deciding the full coverage premium. If you’re careful, you can lower your vehicle’s overall premium.
Here are a few tips:
No Claim Bonus
As the costs of your vehicle increase each year, including the civil liability insurance premium, you can take advantage of the bonus-malus to reduce the multi-risk insurance premium. For each claim-free year, your insurer grants you a no-claims premium and you benefit from a discount when renewing your contract. The AON starts at 20% and increases to 50% in the sixth year.
The first and easiest way to get the SCB is to drive safely and avoid circumstances that could lead to a claim. Second, try to avoid making a claim for small damages. Any small claims may result in the loss of NCB. For example, if your NCB is Rs 6,000 next year and you claim insurance for repair work of Rs 2,000, it will result in a loss for you.
The SOP is not for the vehicle, it is for the vehicle owner. So even if you sell your vehicle, you are entitled to the benefit. And, you don’t lose your NCB even if you change insurers.
A deductible forms part of the claim and must be paid by the policyholder before the insurance cover takes effect. A compulsory deductible amount is set by the insurance authority and must be paid by the policyholder in the event of a claim. In voluntary deductible, the share of the loss will be decided by the owner of the vehicle. The higher the voluntary deductible, the lower the car insurance premium.
For example, if your mandatory deductible is Rs 1,000 and the total claim amount is Rs 10,000, your insurer will pay Rs 9,000 and you will have to pay Rs 1,000. The mandatory deductible will not affect the premium.
If you choose to pay a higher amount as a deductible and are prepared to pay a higher amount in the event of a claim, this will reduce the premium. However, the policyholder should consider affordability and have a clear understanding from the insurance company of what reduction this would entail on the premium.
Top-up coverages help you get extra coverage by paying a small fee. Each add-on will have a special focus area. The best known among the add-ons is Zero Amortization. It is also known as zero damping or bumper-to-bumper coverage. Like all other assets, the value of the vehicle also decreases with each passing year. For each component of the vehicle, a depreciation rate has been set. For example, the fiberglass of your vehicle is damaged in an accident and the cost of its replacement is Rs 20,000. In a standard car insurance policy, the insurer will only pay you Rs 14,000 after depreciation by 30%. However, if you have additional zero-deposit cover, you will get the full Rs 20,000 from the insurer (or the maximum percentage mentioned in the policy).
Going further, the return on investment supplement also covers the cost of the vehicle, road tax and registration. You can only buy it when purchasing a new vehicle.
Other popular add-ons include roadside assistance, medical coverage, and engine protection, among others. Since you have to pay an additional amount for each of these additions, your premium increases significantly. Therefore, assess their necessity and decide. At the same time, reducing the premium by not opting for the necessary coverages will not be prudent.
Third-party warranty for older vehicles
The value of the vehicle depreciates over time. So, if your car is more than 10 years old, it is better to opt only for third-party coverage. Because, after taking into account the depreciation, the amount of the claim provided by the company will be meager. Which means that you risk paying a large part of the bill for each repair or maintenance. In this case, it is not necessary to pay a large sum for full coverage.
Pay for use
In “pay as you drive” insurance, a premium is charged based on the use of the car. Currently, it is offered on a pilot basis. This is offered by some insurance companies in some cities. The policy aims to correct the anomalies by charging the same premium regardless of the use of the car.
* Making modifications to the vehicle will result in an increase in the insurance premium. But, if the insurer is not informed of the changes, the company could reject your claim.
* You can compare the policies offered by different companies and decide. You have the freedom to purchase or renew a policy from any company. There may be variations in the premium amount and Insured Declared Value (IDV) of the vehicle from company to company. Beware of companies that try to offer a lower premium by lowering the IDV. Do not fall for such tactics which might result in little benefit.