How to choose the right auto insurance policy and supplements for your vehicle

There are some useful add-ons that make your policy truly comprehensive. They cost extra, depending on the terms and conditions, but prove invaluable in case you need them.

Anyone who has been exposed to driving on Indian roads will agree that it is much easier to get into crashes than to get out of them. The data reflects this fact. According to a recent World Bank report, India records an alarming number of around 4.5 lakh of road accidents each year. Not only that, the report also states that India is at the top of the list when it comes to road crash fatalities, even though we only contribute 1% of the total number of vehicles in the world. These numbers certainly paint a grim picture, but they are also a warning indicator for you to prepare for your road trip with a robust auto insurance policy and select add-ons that best suit your needs.

Given the dire need for auto insurance in the country, the government had also mandated valid liability insurance for all vehicles used both personally and commercially in 2019. Road accidents are a painful experience for all. the people involved. Liability insurance, compulsory by law, covers damage caused by your vehicle to any third party. But a comprehensive insurance policy guarantees risk coverage for your own vehicle against any unprecedented financial loss resulting from accidents. In addition, accidents are not the only threat covered by an all-risk insurance policy. It is also a safety net against risks such as theft or natural disasters.

With the easing of COVID-19 restrictions, vehicles are back on the roads as usual. This may be the best time for you to reassess your auto insurance needs.

Here’s how you can protect yourself and your vehicle with the right auto insurance coverage and select the best supplements for your needs:

Assess your needs: Third Party Coverage vs. Own Damage Coverage

Since Third Party Insurance (TPI) is a mandate by law, it is a must for all vehicles. However, you can choose between opting only for TPI and an all-risk insurance policy that also covers damage to your own vehicle. If you have an older vehicle or don’t hit the road often enough, liability insurance may be a good option for you. This is because you might end up paying more premiums in an extended policy when you might not need them. For small damages, paying out of pocket might be a cheaper option than an extended policy.

On the other hand, if your vehicle is new or driven regularly, you should absolutely opt for comprehensive coverage. This will not only ensure protection against accidental damage, but also against risks such as flood, fire, theft, etc.

Important supplements for your car insurance

Speaking of comprehensive coverage, there are a number of useful additions that make your policy truly comprehensive. They cost extra, depending on the terms and conditions, but prove invaluable in case you need them. Check with your insurer for these supplements before taking out automobile insurance. Some of the popular add-ons are –

# Zero Amortization Coverage – The value of the vehicle itself depreciates as it ages. The insurance policy generally does not cover the depreciation of your vehicle. Thus, at the time of settlement, the amount of the claim is calculated after deduction of the depreciation charge. However, adding Zero Amortization coverage to your policy also allows for amortization costs to be factored in and a higher claim amount at the time of settlement. This add-on typically covers cars less than 5 years old or bikes less than 2 years old. Some insurers also offer zero amortization for up to 7 years.

# Return to invoice cover – Speaking of depreciation, a vehicle is considered depreciated as soon as it is sold outside the showroom. Thus, in the event of total loss, the policyholder will be entitled to the market value of the vehicle, which will be less than the amount for which it was purchased. Adding this coverage to your policy allows you to claim the cost of the vehicle’s original invoice in the event of total loss.

# Roadside Assistance Coverage – This coverage comes in handy when your vehicle breaks down in the middle of the road and you need immediate assistance. Adding roadside assistance coverage to your policy ensures that the help you need is right at your fingertips. The insurer will call a mechanic who will help you on site if necessary.

# Engine protection cover – The engine is the heart of your vehicle and it sustains non-accidental damage while keeping your vehicle running. Unfortunately, this damage is not covered by insurance. This add-on allows you to insure your vehicle against risks such as an oil spill, water infiltration or mechanical breakdown, etc.

# No-claim bonus coverage – This coverage helps keep your no-claims bonus intact. No claims bonus in your policy will reward you if you have not made a claim during the policy year. This is essentially a discount on the insurance premium at renewal if there is no loss during an insurance year. However, as soon as you submit a claim, even a minor one, your SOP lapses and you must pay the premium in full. The NCB additional function protects your bonus in the event of a claim during the insurance year.

Select your IDV

IDV or declared insured value is the total value for which your vehicle is insured. Contrary to popular belief, the IDV does not represent the market value of your vehicle. It simply represents the total amount that will be paid in the event of a total loss. It is important that you choose an IDV that matches your needs.

Check the claims settlement ratio

Before focusing on a plan, always check the claims settlement ratio. This ratio refers to the number of claims settled by the insurer compared to the total number of claims received in a year. Typically, a CSR of 90% or more is considered the ideal ratio. Also, you need to make sure that the claims settlement process should be quick and hassle-free.

You can also customize your vehicle insurance according to your needs. Choose the plan and add-ons that best suit your needs to protect yourself and your vehicle.

(By Tarun Mathur, CBO-GI, Policybazaar.com)