How to fine tune your car insurance

Much attention is paid to which car to buy. But, its insurance gets neglected. The idea is not to get just some insurance but a comprehensive one that leaves you free of worry. Here's how you can fine tune your car insurance.

First gear. Insurance is often provided free for the first year for a new car.

Car insurance has two components - own damage (when your vehicle is damaged in an accident) and third-party liability (when damage occurs to the other person's life and vehicle). Anyone other than the insurer and the insured is third-party. Third-party liability insurance is compulsory.

The sum insured of a vehicle in a motor policy is referred to as the insured's declared value. In case of theft or total damage, the claim amount payable is based on the IDV. The IDV is fixed on the basis of the car's price less the depreciation of the brand and model. This value is adjusted for depreciation.

The choice. You can decide how much the IDV will be. The sum insured depends on the market value of a vehicle. Avoid being over- or under-insured as the claim will be paid on the basis on the market value and what was insured.

Even if the IDV remains the same, the premium can differ across insurers. Of course, the lower the premium, the cheaper is the cover. But, don't let premium be the only deciding factor.

Fortify your policy

Someone else driving your car. You can easily insure your driver against personal accidents by paying a small additional premium of Rs 25. Ensure that he or anyone else driving your car has a valid licence. Else the claim will be rejected.

Personal accident cover. Other than for yourself, get personal accident cover (limited to Rs 200,000) for other passengers as well.

No-claim bonus. While switching insurers, the NCB can be transferred to the new policy. NCB is a reward given to the owner of a vehicle and is not attached with the vehicle. So, if you sell your car and buy a new one, you can transfer the NCB to the new one. The car buyer, however, will not get the NCB benefit when he renews the policy.

Discounts. Some insurers now offer discounts based on the age of the insured. In HDFC Ergo General Insurance, for instance, there is a 5 per cent discount on the 'own-damage' portion of the policy for those in the 36-45 years age group and 10 per cent to those over 46 years. There are profession-based discounts also.

Further, you can get a discount of 5 per cent (maximum of Rs 200) if you are a member of an approved automobile association, and 2.5 per cent (maximum of Rs 500) if you have installed an approved anti-theft device.

Garage tie-ups. Check to see the number of garages the company has tied up with for cashless transactions.

If you enjoy tinkering with your car's engine and modifying the power or performance, disclose this information to the insurance company. Failure to provide material facts about the car, including previous accidents, can lead to claim rejection.

Extra layer

You can attach several add-ons to the basic policy by paying extra premium. Cholamandalam MS General Insurance's Chola Protect 360 offers features like nil depreciation, reinstatement value in case of total loss, daily allowance while the car is under repair and cover for loss of personal belongings, car keys and driving licence.

IFFCO TOKIO General Insurance has 'On Road Protector' feature as an add-on. If your vehicle stops due to an accident or a breakdown, you can call for roadside assistance.

Tata AIG General Insurance is set to offer 'Depreciation Reimbursement' add-on in which full claim on the value of parts replaced is given without any deduction.

Unlike the existing model, where the IDV is paid for total loss or theft, the 'Return to invoice' add-on offers to pay the shortfall between the amount you get and the original value of the car or the current replacement price of a new car if the exact make/model is available, whichever is less. The No-Claim Bonus Protection add-on gives you the bonus even if there is a claim.

On the safer side

Other than the basic cover that car insurance policies provide, tick against these options to enhance the coverage:

• Insure your driver against personal accidents. It costs only Rs 25
• Other than personal accident cover for yourself, get it for other passengers also (limit: Rs 2 lakh)
• Check for number of garages the insurer has tie-ups with for cashless servicing
• If you like to tinker with your car, make sure inform the insurer of this
• Ask if there are any age-based discounts on offer. With HDFC Ergo General Insurance, for example, if the insured is aged 36-45 years, he can get 5 per cent discount on 'own damage' part of the policy and 10 per cent if age is above 46 years.
• Also check for profession-based discounts
• While switching to another insurer, retain the no-claim bonus. This is also applicable if you have sold a car and bought a new one
• Benefit of towing charges is also available

Before you buy a policy

Bargain. If you are buying directly from the insurer, bargain for the best price. Typically, they have a margin of 5 per cent.

Search. Go to different brokers before buying a policy. Brokers have tie-ups with a number of insurers while an agent represents just one insurer. Large broking houses have attractive deals with the insurers. Also, since they represent the clients' interest, they come in handy at the time of a claim.

Don't let discounts weaken your cover. Always ask what covers you are getting. A comprehensive policy covers theft or damage to your car, third-party liability as well as the passengers in the car. The cost of covering the passengers and a paid driver comes to around Rs 250 and is optional. But, don't ignore this cover for a discount, especially as the cost is low.

Get full cover. Get insurance on a full IDV as this is the amount that the insurer would pay if your car got completely damaged or stolen. Higher discounts might mean a lower IDV. So, ask for the exact IDV to get a real idea of the insurance amount.

Pay from your pocket. Look at the co-payment clause. Also known as 'excess' in the policy. This clause makes you bear a portion of a claim. A higher excess would mean a lower premium since you shift some of the risk from the insurer on to yourself.

So, if you agreed on a voluntary deductible of Rs 2,500 and there is a claim for Rs 7,500, the insurer will pay Rs 5,000. Though you cannot take a deductible above Rs 15,000, the option still makes sense. But, if you can't afford to pay a higher portion of the claim then don't bump up your excess. Check with the agent to see if the discount in the premium means a higher excess for you.