The Hindu Business Line : Insure before you zoom away

Are you excitedly counting days to take delivery of the new car you booked? But before you can unleash your creativity to choose the accessories to go with the car; don’t forget to select an insurance policy for your dream machine.

Like it or not, motor insurance is mandatory. Though car insurance may seem expensive on the face of it, some bit of planning and eye for detail may help you lessen the burden, especially after all the relaxations in regulations that have happened in the past few years.

With tariff controls on insurance gone, general insurers are competing to offer a host of additions and discounts. So before you settle down on the policy, scout around to avail the best deal.

Here are a few things that may help you understand the nuances involved in shopping for a car insurance policy.

The process of availing a car insurance policy is much easier than taking a life insurance or Mediclaim policy. All you need to produce is the proof of purchase along with a copy of the RTO book.

What is insured?

At the time of availing the insurance, be sure about which parts of your car fall under the coverage of the insurance policy. By default the policy will cover only those that come along with the car at the time of purchase. Usually the electrical and non-electrical fittings such as fog lights, music system and seat covers have to be disclosed and insured separately.

In case the car is fitted with a bi-fuel system as petrol/diesel and CNG/ LPG, permitted by the RTO concerned, the CNG/LPG kit is to be disclosed and insured separately. Most insurance companies charge and additional premium of 4 per cent on the value of such kits. If you have made any additions or improvements to the car after taking delivery, those parts or accessories need separate disclosure if they have to be covered by the policy.

Let’s say you have purchased the base model of Maruti Suzuki Ritz and you have replaced the standard seat covers and music system with plush leather upholstery and a Pioneer music system.

The insurance company will not entertain any claims on them if these additions have not been disclosed at the time of availing the policy.

Likewise, don’t forget to inform your insurer about additions made in the subsequent years of availing the policy. These disclosures may involve an extra bit of work and an increase in the insurance premium outgo but you can be assured of your claim getting fulfilled.

Companies insist that customers reveal all details about their cars at the time of insurance as it may lower the premium and entitle you to avail good number of discounts. According to Mr Sanjay Datta, Head of Customer Service Health and Accident, ICICI Lombard General Insurance, “Proper disclosures help the insurers to price the risk more appropriately.

Many factors such as usage of vehicle and claims history have direct impact on insurance premium.

“Risk experience is the sole criteria for determining insurance premium charged and the coverage of the insured vehicle. Pricing is done on the basis of risk profile of the location, model and age of the vehicle across all the models.”

Based on the discretion of the insurer, past performance of the make and model may also earn you some discount. A model with favourable loss ratio will enjoy higher discounts than those that frequently meet with accidents. That apart, attributes of the driver and prohibitive repairs cost will also play a part in determining the discounts.

“Traditionally, pricing was done on the basis of risk experience of the location, model and age of the vehicle. However, after de-tariffing, many insurers have started building database of customer’s personal details like occupation, gender, family size. Such factors are expected to play an important role in determining premium,” said Mr Datta.

Other discounts

Most companies offer discounts for voluntary deductibles, fitting of safety features approved by Automobile Research Association of India and customers who are members in automobile associations.

Voluntary deductibles are discounts given to customers who opt to bear small claims for minor damages. This discount can go up to 35 per cent of the premium for vehicle damage. While these are the smaller aspects, the biggest discount that you can avail is the No Claim Bonus (NCB).

There may be times when the car has not suffered damages and at such times, insurance companies reward their customers by giving them a discount called No Claim Bonus. This discount can be availed from the second year.

Starting from 20 per cent discount on the premium, the bonus can go up to 50 per cent during the sixth year. But the bonus lapses and the process starts afresh if a claim is made. When you move from one insurer to another or change your car, NCB can be carried forward.

If under the old policy you were entitled to a discount of, say, 35 per cent after four years, it can be carried to the new policy. So in the next year, under the new policy, you can avail a discount of 45 per cent.

Other factors

Most companies also offer third party insurance.

A comprehensive policy insures the vehicle against risks arising out of theft or damage to the vehicle, death of the driver or passengers in an accident, and damage caused by the vehicle to other people or property.

A third party insurance covers the damage occurred to another vehicle or property when your car crashes into it. But accidents, theft or damage to the other vehicle are not covered in the policy.

Also be aware of the claims that are covered by the insurer.

The benefits of insurance will remain in case the car is going to be chauffer-driven. Just make sure your diver is a valid licence-holder.

To insure the person who is driving the vehicle but is not the owner, an additional personal accident cover has to be taken for unnamed passengers. In case of owner-driven cars, it is compulsory to have a personal accident cover, according to tariff.

Usually, fire, burglary, riots, unintentional accidents, thefts are covered by the policy, and incidents such as echanical breakdown, wear and tear, depreciation and accident due to intoxicated driving are don’t fall part of the claim.

Similarly, each component has a different structure of being eligible for the claim. For example, plastic components such as the bumper will be entitled for only 50 per cent of the claim, while glass parts will be eligible for full amount.

Another interesting feature is that of cashless claim.

The procedure works similar to that of a Mediclaim policy. Most insurers have tie-ups with garages to facilitate cashless claims. Online renewal is another added advantage in most insurance policies.

When your car meets with an accident the usual documents for claims include the claim form, the vehicle’s registration book, copy of the First Information Report, driving licence and the insurance policy.

Each insurer may have a different procedure for claims. Hence the documents to be produced may also vary.

More Stories on : Cars | General Insurance

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