Personal Finance

How to pick the right plan for your vehicle

Kapil Mehta | Updated on June 02, 2019 Published on June 02, 2019

Do the groundwork and evaluate the policy thoroughly

Most people buy motor insurance as it is mandatory under Indian law. Ideally, it should be bought to safeguard the vehicle from unforeseen damages; evaluate the plan thoroughly before opting for one.

Recently, a friend bought a new car. He checked its features, took the car for a test drive and, satisfied with his choice, booked the vehicle.

At the dealership, my friend was filling out the necessary forms, when the insurance proposal caught his eye. When he enquired about the policy details, the salesperson said that the policy that was being offered was quite good. Unconvinced, he asked to see the insurance contract and, after some hesitation, was shown the policy that the dealership was offering. There was room for improvement.

Know the plans

The practice of ignoring coverage details in a motor insurance policy is common. Most people buy the policy that the vehicle dealer offers without any research or negotiation. This is a mistake.

It is often possible to get policies at a lower cost with better covers than what are available with the dealer. When you buy a motor insurance, there are certain aspects that should be considered.

First, understand the risks covered under the policy. Motor plans come in two variants — third-party and comprehensive.

Third-party plans cover the mandatory third-party liability that you may face if you cause physical harm to any individual or damage to a person’s property. They do not cover the damages suffered by your own vehicle.

Comprehensive plans, on the other hand, cover third-party liabilities and those suffered by your vehicle in an accident.

Comprehensive plans provide wider coverage but the premiums are also high compared to third-party policies.

If you are buying a new car or your car is not more than five years old, comprehensive plans are ideal because repair costs can be high. If, on the other hand, your vehicle is quite old or you use it sparingly, you can make do with third-party plans.


Second, look out for add-on covers. Motor insurance policies offer different types of add-on coverage options at additional premiums. These options increase the scope of coverage. Add-ons like roadside assistance (although many insurers have now made this a part of the base product) and zero depreciation should be chosen with a comprehensive cover.

Roadside assistance allows you to get round-the-clock help if your vehicle breaks down. In case of zero depreciation cover, the depreciation of your vehicle’s parts is ignored when a claim is made. The insurance company pays the full cost of the parts which are repaired or replaced, without deducting depreciation. Thus, a zero depreciation cover increases the claim pay-out.

However, other add-ons should be selected only if required. For instance, the engine protect add-on is suitable if you live in an area where there is heavy rainfall and is prone to water-logging.

After the coverage is secured, look out for premium discounts. Comprehensive motor insurance policies offer various types of premium-related discounts. For instance, you can get a discount for installing safety devices; for being a member of automobile associations; for choosing a voluntary deductible and for any accumulated no-claim bonus.

No-claim bonus is allowed when you don’t make a claim in your policy. The bonus allows a discount in the renewal premium when the policy is renewed.

Moreover, you can also transfer your no-claim bonus to another policy, when you sell your vehicle. Look out for these discounts to reduce your premium outgo.

So, when buying a motor insurance policy, do complete research. You can reach out to insurance intermediaries who would do the groundwork and help recommend the best policy. Just make sure that when you buy the policy, the vehicle details entered in the plan are correct and it offers the right insurance declared value (IDV).

The writer is Managing Director,

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Published on June 02, 2019
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