Bought a car this Diwali? Now, here’s how to bring down your insurance costs

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Car sales in India have finally gathered momentum this festival season after battling the sluggish phase of the pandemic and the subsequent supply chain challenges. Buyers are making the most of this post-pandemic rebound, which is reflecting in countrywide passenger vehicle sales touching a new monthly record of over 3.5 lakh units in September 2022, ahead of Diwali. It’s no wonder that owing to discounts and great offers, people are looking forward to festivals like Dhanteras to buy a car.

Besides discounts and great offers, there’s another crucial area that can add to your savings – your motor insurance premium. As it is known, motor insurance is a mandate by law and also indispensable for one’s safety on road. While people look for ways to save on fuel and a car’s showroom price, they often forget to take into account the premium cost. So, if you have bought a car or are planning to buy one this festival season, here are ways to help you cut down on the premium outgo and add to your savings.

Driving less? Opt for 'pay as you drive’ insurance

The tech-enabled ‘Pay as you drive’ (PAYD) is a new concept that was launched as a regulatory sandbox policy by the Insurance Regulatory and Development Authority of India (IRDAI) during the thick of the pandemic in 2020. The PAYD car insurance model is a usage-based approach, where the policyholder gets a binding third-party liability insurance policy but the own damage component depends on the usage of the car. Recently, the model was launched in the market by the regulatory body as an add-on to help consumers save on premium. With a tracking device or a mobile app, it is possible to track the distance driven in kilometres and base the premium on that. Alternatively, insurers also offer policies where you can switch off your insurance on days you don’t plan to drive your vehicle. This ideally works best for people working in a remote set-up or hybrid model, or anyone who doesn’t drive often and prefers public transport or cabs instead.

Driving safe? Choose ‘Pay how you drive’ add-on

Until recently, there was no mechanism to reward good driving, except for the no-claim bonus or NCB.

However, IRDAI recently launched the ‘pay-how-you-drive’ model that tracks the driving habits and profile, and rewards them with a discount on premium for good driving. So, someone who follows rules and drives carefully can choose to pay a lower premium than someone who violates the rules or crosses the speed limit. This is a great add-on, not just for the discount, but also for maintaining road safety.

Own multiple cars? Go for a family-floater policy

There’s no dearth of families in India where members own individual cars. However, that doesn’t mean that they are all being used at the same time. Often, people reserve a bigger SUV for long-distance trips and use smaller cars for day-to-day needs. In such a case, you don’t need to pay the standard premium round the year for all the cars.

You can opt for a family floater plan where all your vehicles will be insured under one single umbrella plan and the premium will come down automatically.

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Consider the deductible

In the context of motor insurance, deductibles ― also referred to as voluntary deductions ― are the out-of-pocket costs that the insured agrees to bear at the time of claim. The deductible needs to be chosen carefully and as per your risk profile.

For instance, if you keep the deductible as nil, you will receive the entire claim amount without having to pay anything out of pocket, but will have to pay a higher premium.

On the other hand, if you are a confident driver who is less likely to make a claim, you can choose a higher deductible and save on premium. However, you need to note that there’s a Rs 1,00 compulsory deductible applicable, even if you select the voluntary deductible as nil.

Make the most of the No-Claim Bonus

As mentioned earlier, no-claim bonus is the most popular way of cutting down on premium cost. This is a bonus that an insurance firm provides to the policyholder for taking good care of the car and not making a claim during the year.

This means for each claim-free year, the insured will save money by receiving either attractive discounts or having to pay lower premiums on purchase or renewal of insurance. For instance, as per regulations, you are eligible for up to a 20 percent reduction in the first year, a 25 percent discount after two years, a 35 percent discount after three years, and a 45 percent discount after four years if no claims are made.

This bonus, however, stands null and void even if you make even a minor claim or don't renew your insurance within three months of the policy's expiration date. Hence, it is advised against filing a claim for minor damages and instead paying for them yourself.

Likewise, when buying a new automobile by trading in an old one, remember to transfer your no-claim bonus. You can also opt for no-claim bonus cover to keep it intact, even if you make a claim.

Besides the above tips, for a bit more savings, it’s best to compare the various policies and features online before making a purchase decision. Also, read the fine-print and comprehend any hidden expenses before choosing your preferred policy.