Car insurance premiums for new cars have become expensive, especially after the Supreme Court has made long term third-party insurance cover mandatory for new cars to run on the road.
The festive season has begun which has given impetus to the shopping spree. The offline and online media is filled with ads about the big festival season and the offers. Each year the shopping festival gets bigger and bigger and at times you are spoilt for choices. This is a peak period for vehicles, consumer durables and electronic gadgets.
This is also that part of the year when new car and two-wheeler models are launched offering a range of discounts and cashbacks. This year, however, car insurance premiums for new cars have become expensive, especially after the Supreme Court has made long term third-party insurance cover mandatory for new cars to run on the road.
Not only long term insurance, the compulsory personal accident cover under motor insurance policies have also been increased from Rs 2 lakh to Rs 15 lakh. This has again escalated the motor insurance cost. So, if you have been wondering how to reduce the cost of your car here are some smart tips to lower your premiums.
The new IRDAI guidelines require that all new vehicles must have a long-term Third Party (TP) cover. However, you should know that the long term cover for Own Damage (OD) part of the motor insurance is optional. If you want to lower the premium amount, then you can buy OD cover for just 1 year and go for long-term cover for TP.
No Claim Bonus (NCB) is a benefit for not making a claim. If you have sold your old vehicle and bought a new vehicle, you can transfer this NCB to your new vehicle. This will help in reducing the insurance premium for your new vehicle. Therefore, always retain the insurance in your name even after selling your vehicle and ask the insurer to give you the no-claim certificate. Whenever you buy a new car you can reduce the car insurance premium rate for the new insurance policy by carrying forward the accrued no-claim bonus.
Go for deductibles
If you are confident of your driving habits, you can go for voluntary deductible to lower your premium. A deductible is the out-of-pocket amount paid by the policyholder when making a claim. While opting for deductibles, a higher voluntary deduction makes sense in two cases – one, if you are an extremely safe driver, which significantly lowers the chances of an accident and two, if you have not claimed insurance for a few consecutive years.
Concession for laid-up vehicles
You can also extend your insurance coverage if for some reason your vehicle gets off the road and remains not in use for long time. The laid-up provision allows you to minimise your insurance cost by extending the motor insurance cover for the period during which the vehicle remained not in use. To avail the benefit, you, however, need to inform the Regional Transport Office (RTO) of the area.
Choose add-on covers carefully
Motor insurance offers a range of add-on covers ranging from zero depreciation to engine cover. These add-ons are optional and are offered to improve the basic coverage of the policy. By carefully choosing the add-on covers you can minimise the cost of your car insurance, while enhancing the coverage. For example, you can minimise your motor insurance premium by opting for zero depreciation cover from the second year onward, as the cost of depreciation remains low during first few years of ownership.
Avoid Small claims
One of the biggest disadvantages of the small claim you make is that you lose the distinct advantage of the No Claim Bonus (NCB). No claim bonus is the bonus accrued for every consecutive ‘claim-free’ year over the policy term. The NCB can lower your car insurance premium up to a maximum of 50%; so, your next year premium sees a 50% dip in the own damage section.
If the claim amount is very small the wisest way to use your insurance is to get small repairs done at local workshops. This is because sometimes the claimed amount could be lesser than the total processing charge and the loss of NCB. The thumb rule is to keep in mind that if the repair amount is lesser than the NCB, then you can potentially accumulate your NCB by refraining from making a claim.
Installing safety features/anti-theft devices like locks for the steering wheel and gear, air bags, anti-theft alarms etc. could fetch you a 5% discount on your premium. Further, people linked with associations like Automobile Association of India (AAI) can get special benefits and discounts on premiums. These associations are empowered under the Motor Vehicles Act and Rules and the members therein are deemed as ‘safe drivers’.
Avoid the Frills
Car modifications like adding alloy wheels, spoilers, etc., and expensive gadgets like automotive night vision, ultrasonic sensors, etc. may lead to a higher premium. Hence, such modifications and gadgets should ideally be avoided if you wish to keep your premium low. However, if you still want to introduce modifications at the cost of higher premiums, notify your insurer.
Based on the policyholder’s age, driving record, profession, and various other criteria specified by the insurance company, the policyholder could avail car insurance premium discounts.
When people have multiple insurance policies (in any category) with the same insurance company, and they approach the same provider for a car insurance policy, the provider offers a lower car insurance premium as a loyalty reward.
Choose your insurer wisely
One of the most important aspects is to select your insurance provider. Before zeroing down on one, check their claims paying ability and their processes which give ease and convenience through app, network of authorised workshops, etc.
Renew on time
Once your car insurance policy lapses, you may not qualify for NCB that you would otherwise have been eligible for. While buying your policy, make a note in your organizer or ask your provider to send a reminder before the policy expires, so you renew your car insurance policy without fail.The writer is MD & CEO, IFFCO Tokio General Insurance