What to watch out for when buying car insurance

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Purchasing car insurance is essential for protecting your vehicle and finances, but choosing the right policy can be overwhelming. With so many options, it’s crucial to look beyond just the premium and focus on the features, coverage, and terms. Here’s a guide to the key factors to consider when buying car insurance:

1. Coverage types

Understand the difference between third-party liability insurance and comprehensive insurance:

Third-party liability: Mandatory by law, this covers damages or injuries caused to a third party but doesn’t protect your vehicle.

Comprehensive insurance: Offers wider protection, covering third-party liability as well as damages to your own vehicle due to accidents, theft, fire, or natural disasters.

Tip: Opt for comprehensive coverage if you want complete protection.

2. Add-on covers

Evaluate whether you need optional riders to enhance your policy. Popular add-ons include:

• Zero depreciation: Covers the full cost of replacing car parts without factoring in depreciation.
• Engine protection: Useful for cars in flood-prone areas.
• Roadside assistance: Provides help in case of breakdowns or emergencies.
• Return to invoice: Pays the full invoice value of your car if it’s totalled or stolen.
• Watch out: Add-ons increase your premium, so choose only those relevant to your needs.

• Understand what isn’t covered by your policy. Common exclusions include:
• Wear and tear or mechanical breakdowns.
• Driving under the influence or without a valid license.
• Consequential damage (e.g., engine failure after an accident).

4. Claim settlement ratio (CSR)

Check the insurer’s claim settlement ratio, which indicates how many claims they approve compared to total claims received. A higher CSR reflects reliability in handling claims.

Tip: Choose an insurer with a CSR of 90% or above for hassle-free claims.

5. Deductibles

Deductibles are the portion of the claim amount you must pay out of pocket before the insurer covers the rest.

Voluntary deductible: Opting for a higher deductible lowers your premium but increases your out-of-pocket expenses during a claim.

Watch out: Ensure the deductible amount is affordable for you in case of an accident.

6. Network garages

Check if your insurer has a wide network of cashless garages for repairs. Cashless claims eliminate the need to pay upfront and wait for reimbursement.

Tip: Choose an insurer with a strong network of garages near your location.

7. No Claim Bonus (NCB)

No Claim Bonus is a discount on premiums for every claim-free year. It can reduce your premium by up to 50% over time.

Watch out: Ensure your policy allows NCB retention if you switch insurers or renew late.

8. Premium vs. coverage balance

Don’t choose a policy based solely on the lowest premium. A cheaper policy may lack adequate coverage or include high deductibles, costing you more in the long run.

Tip: Strike a balance between affordable premiums and sufficient coverage for your needs.

9. Policy terms and conditions

• Always read the policy document thoroughly to understand:
• How claims are processed.
• What documentation is required.
• Any specific conditions that could affect coverage.
• Watch out: Ambiguous terms or hidden clauses can complicate claims later.

Research the insurer’s customer service reputation by reading reviews and feedback. Good customer support is essential for quick issue resolution and smooth claim processing.

Tip: Opt for insurers with a track record of responsive and efficient service.

When buying car insurance, it’s important to look beyond the premium and evaluate the coverage, add-ons, and reliability of the insurer. By understanding your needs, comparing policies, and paying attention to details like exclusions and claim processes, you can choose a policy that provides the best protection for your vehicle. A little diligence upfront can save you from financial and emotional stress in the long run.