How to choose the right auto insurance policy and supplements for your vehicle
Anyone who has been exposed to driving on Indian roads will agree that it is much easier to get into crashes than to get out of them. The data reflects this fact, with an alarming rate of around 4.5 lakh of road accidents each year, according to a recent World Bank report. Not only that, the report also states that India is at the top of the list when it comes to road crash fatalities, even though we only contribute 1% of the total number of vehicles in the world. These numbers certainly paint a grim picture, but they’re also a cautionary tale to help you prepare for your road trip with a solid auto insurance policy and add-ons.
Given the dire need for auto insurance in the country, the government had also mandated valid liability insurance for all vehicles used for personal and business purposes in 2019. Road accidents are a painful experience for all people. involved. Third party insurance, compulsory by law, covers damage caused by your vehicle to third parties. But a comprehensive insurance policy also guarantees risk coverage for your own unprecedented financial loss. In addition, accidents are not the only threat covered by an all-risk insurance policy. It is also a safety net against risks such as theft or natural disasters.
With the easing of COVID-19 restrictions, vehicles are back on the roads as usual. This may be the best time for you to reassess your auto insurance needs.
Here’s how you can protect yourself and your vehicle with the right auto insurance coverage and the right supplements –
Assess your needs: Third Party Coverage vs. Own Damage Coverage
Liability insurance (TPI) being a legal mandate, it is essential for all vehicles. However, you can choose between opting for TPI only and a policy that also covers damage to your own vehicle. If you own an older vehicle or don’t hit the road often enough, third-party coverage is a sufficient option for you. This is because you might end up paying more premiums in an extended policy when you might not need them. For small damages, paying out of pocket would be a cheaper option than an extended policy.
On the other hand, if your vehicle is new or driven regularly, you must absolutely opt for comprehensive cover in addition to liability insurance. This will not only ensure protection against accidental damage, but also against risks such as flood, fire or theft.
Important supplements for your automobile insurance
Speaking of comprehensive coverage, there are a number of useful additions that make your policy truly comprehensive. They come at an additional premium, depending on the terms and conditions. Check with your insurer for these supplements before purchasing auto insurance –
Zero Amortization Coverage – Each vehicle suffers from depreciation over the years. The insurance policy generally does not cover the depreciation of your vehicle. At the time of settlement, the receivable is calculated after deduction of the amortization charge. However, adding this coverage to your policy also allows you to factor in amortization costs and get a higher claim amount at the time of settlement. But this add-on usually covers cars less than 5 years old or bikes less than 2 years old.
Back to invoice cover – Speaking of depreciation, a vehicle is considered depreciated as soon as it is sold out of the showroom. Thus, in the event of total loss, the policyholder will be entitled to the market value of the vehicle, which will be less than the amount for which it was purchased. Adding this coverage to your policy allows you to claim the cost of the vehicle’s original invoice in the event of total loss.
Roadside Assistance Coverage – This coverage comes in handy when your vehicle breaks down in the middle of the road and you need immediate assistance. Adding roadside assistance coverage to your policy ensures that the help you need is right at your fingertips. The insurer will make the necessary arrangements for a mechanic to help with the necessary.
Motor protection cover – The engine is the heart of your vehicle and it sustains non-accidental damage while keeping your vehicle running. Unfortunately, this damage is not covered by insurance. This add-on allows you to insure your vehicle against risks such as an oil spill, water infiltration or mechanical breakdown, etc.
No-Claim Bonus Coverage – This coverage helps keep your no-claims bonus intact. No claims bonus in your policy will reward you if you have not made a claim during the policy year. This is essentially a discount on the insurance premium at renewal if there is no loss during an insurance year. However, as soon as you submit a claim, even a minor one, your SOP lapses and you must pay the premium in full. The NCB additional function protects your bonus in the event of a claim during the insurance year.
Check the claims settlement rate
Before focusing on a plan, always check the claims settlement ratio. This ratio refers to the number of claims settled by the insurer compared to the total number of claims received in a year. Typically, an ESR of 90% or more is considered the ideal ratio. Also, you need to make sure that the claims settlement process should be quick and hassle-free.
You can also customize your vehicle insurance according to your needs. Choose the plan and add-ons that best suit your needs to protect yourself and your vehicle.
The author is CBO-GI at Policybazaar.com. The opinions expressed are those of the author.