India is home to one of the most congested roads in the world. Vehicles are lined up bumper to bumper on roads. Accidents are very common causing damage to colliding vehicles and sometimes people also. In such a scenario it is very important to buy a motor insurance policy to make good of the loss due to the accident. Also, as per Indian law, every vehicle plying on roads should have a valid motor third party insurance.
First, let us try to understand what motor insurance policy is. A motor policy has two sections – Own Damage( OD)and Third Party (TP).
Own Damage (OD)
The premium charged under the Own Damage section covers the damage caused to our own vehicle in an accident or fire. It also covers theft of accessories and theft of the entire vehicle. Loss of motor vehicle due to the earthquake, flood, inundation, malicious damage, fire, lightning are also covered. However, loss due to depreciation, wear and tear and mechanical breakdown of the vehicle is excluded.
Third-Party (TP)
Third-Party is the compulsory section under the Motor Vehicles Act. It covers the loss, damage to any third party vehicle or injury or death of any person caused due to an accident with the insured vehicle. Third-party premium rates are regulated by the Insurance regulatory and development authority (IRDA).
A motor policy in which you pay only TP premium is called liability-only policy. It covers only the TP losses and any damage to your own vehicle is not covered. While the policy in which premium for both OD and TP is paid is called comprehensive or package policy.
Let’s have a look at a few tips which you should keep in mind before buying motor insurance:
1. Add-on Covers
Apart from basic OD and TP cover, many add-on covers are available: You can opt for them wherever required.
Nil depreciation cover
This add-on cover protects the depreciation of the vehicle. In layman terms as the age of the vehicle increases its overall value continues to decrease. For example in the second year value of the vehicle part depreciate as -Metal parts by 5%, all plastic and rubber parts by 50% and fiber parts as 30%. So if this cover has not opted, in the case of an accident, the insurance company will deduct depreciation to arrive at the assessment of the damage. You can opt for this cover by paying an additional premium.
Engine and gearbox protection cover
Cover for damage to vehicle’s engine and gearbox are generally excluded from the scope of basic OD cover. So, you can pay an additional premium for the engine and get the add-on cover.
Return to invoice cover
In this add-on, in the case of a total loss of the vehicle, you get the purchase value of the vehicle and not the depreciated value. But this cover is available to new vehicles only. An additional premium is required to be paid. It is a relatively new add-on in the market.
NCB protection cover
No claim bonus is lost if you lodge an accidental claim in the policy. By paying the additional premium you can protect the NCB, even after claiming the insurance.
2. Personal accident cover for owner-driver
It is not an add-on cover but an optional cover. There is an option to choose a personal accident cover for the registered owner and driver of the vehicle. PA cover for pillion rider is also there in a two-wheeler. This covers the death, permanent partial disablement and permanent total disablement caused as a result of the accident. If you are the owner of a commercial vehicle like Uber or Ola cab then you must choose legal liability for passengers of the vehicle also.
3. Discounts
There are several discounts available to vehicle owners. You can avail these discounts wherever applicable
- Most common is the discount on own damage section. You can ask for a discount of up to 50% percent though allowing it is at the discretion of the company.
- Voluntary deductible: You can get an additional discount on premium by opting for voluntary excess. It means that in the event of an accident or theft claim you will bear an additional loss, which is equal to the amount of voluntary deductible opted by you.
- Anti-theft devices: If an anti-theft device is installed in your car, then you get a discount up to 250/- on OD premium.
- Automobile association membership: If you have a membership in the automobile association of India, the insurance companies give a discount for that.
- No claim bonus: NCB, as it is commonly known, is a discount that is allowed by the company on renewal of the insurance, if you have not lodged any vehicle claim in the existing policy. There are various slabs. For example, if you have one claim-free year, you are eligible for 20% discount, after 2 claim-free years 25 %, 3 claim-free years 35%, 4 claim-free years 45% and after 5 claim-free years you get a discount of 50% on the OD premium. This is the maximum discount you can avail of. All the above-mentioned discounts apply only to the OD section premium and there is no discount on TP premium which has to be paid in full.
4. Age of the vehicle
If your vehicle is brand new, then you should buy comprehensive package insurance covering basic own damage of the vehicle and add-ons such as depreciation cover, engine and gearbox protection cover, return to invoice cover. If the vehicle is more than 5 years old or an obsolete model then you can go for the restricted cover. For example a compulsory third party cover along with theft only and/or fire only cover. This will cover the loss of the vehicle in the events of theft and fire only. There is no point in going for a comprehensive package policy as an insurance company may impose additional excess/deductible since the vehicle is old and prone to accidents.
5. Nomination
While buying policy make sure that nomination is entered correctly in the policy. In the case of a fatal accident where the registered owner dies, the motor accident claim amount and the personal accident benefit amount is paid to the nominee without any hassle. This sounds bad but it is the most practical thing to do for near and dear ones.
6. Long term policies
If you have purchased a new two-wheeler or a car then you can opt for long term policies. These policies are available for 3 years and 5 years. In long term policies, the third-party premium is locked for 3 years or 5 years as per the period of insurance chosen. You can save a few thousand bucks by opting long term policy as IRDA increases the third-party premium at the beginning of every financial year. So in case of a long term policy, the TP premium is locked at the present rate for 3 or 5 years.
7. Beware of fraudsters
Nowadays frauds have become very common. Beware. If you are buying a policy from an agent, make sure that he is legitimate and always pay premium through cheque in favor of an insurance company. Do not transfer the premium amount in the account of the agent or any other person other than the company. After you have received the policy, check it for the correctness of your and vehicle details. If you find any discrepancy immediately contact the agent or the insurance company’s office and get the details rectified. This way you will have a correct policy.
8. Buy Online
There are many websites where you can compare the price of insurance offered by various companies and choose the one with the lowest price. Policybazaar is one such website. Also, many insurance companies give an additional 10% discount on direct buying through their website and doing the digital transaction.
9. Renewal on time
It is very important that your vehicle is insured at all times. So, it is best that you get your policy renewed before the expiry of the current policy. It will save you a few bucks. If your policy expires and you renew the policy after a gap of a few days, the insurance company will ask you to get your vehicle inspected which is chargeable. The issue of policy will be subject to satisfactory pre-inspection. The company might also impose additional excess or even refuse the insurance if your vehicle has some dents and scratches. So the best to avoid such a situation is to get your policy renewed before the expiry of the current policy.
The best you can do is to maintain your vehicle in a good running condition, get it serviced regularly and drive sensibly on the road wearing helmet and seat-belt as the case may be.
Hope this post is useful to all the vehicle owners. In case of any query please ask in the comment section.
Also, Read Tips to avoid getting your motor insurance claim rejected
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