Purchasing a car involves a substantial amount of paperwork. A critical component of this is the paper work required for motor insurance. Amidst all the other formalities we tend to ignore buying an insurance policy ourselves and choose to go instead with whatever our car dealer offers in the package.
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| Mr. Arun Balakrishnan, BerkshireInsurance.com |
However, by investing some time and effort, one can save money and also get a product that suits ones needs. Here are some things one needs to know in order to make a judicious decision about a motor policy.
Firstly, let us understand the two major components of motor insurance. The first is 'Third Party Insurance'. This is the cover for damage you cause to someone else’s property or / person. It does not cover any damage to your own vehicle or property.
Own Damage..!
This part of motor insurance cover is a legal necessity. You can not even drive your vehicle out of the showroom without this cover. The compensation provided for damage herein, depends on the extent of disability caused and on the type of vehicle involved in causing damage. The second component of a motor insurance is 'Own Damage'. This covers you in the event of damage or theft of your own vehicle.
Depending on the type of plan taken, this may also cover injuries to the driver. You can customize the Own Damage cover as per your requirements.
Insured Declared Value..!
One of the first insurance terms you will encounter when looking to insure your car is 'IDV'. IDV stands for Insured Declared Value. This refers to the current market value of your vehicle and is the maximum amount that the insurer will pay in case of theft or total loss.
When you decide to go in for car insurance, the IDV of your vehicle is calculated to eventually determine the premium you will pay. IDV is calculated by subtracting the depreciation rate from the ex-showroom price of your vehicle.
This raises the question – what is Depreciation?
It’s the rate of decline in a car’s value over the course of its shelf life. There are several reasons for depreciation– age, wear and tear or even market conditions. On an average, it is estimated that a car loses 15 % to 20% of its value each year! Insurers take into account the depreciation before determining the IDV of your car.
With each passing year, the IDV of your car will go down. Insurers thus offer a Depreciation Shield add-on to the policy which helps retain the original IDV without accounting for depreciation.
Compulsory Excess..!
Another insurance concept you must be aware of to avoid a rude shock at the time of filing a claim is excess. Excess or deductible is the amount of money that you pay in the event of a claim. There are two types of excesses.
A Compulsory Excess is a fixed amount set by the insurance company, which you will have to pay if you make a claim.
A Voluntary excess on the other hand is an option to choose the amount you are willing to pay in case of a claim. Since volunteering to pay more towards a claim means you take on more risk, taking this option will reduce the cost of your policy. However, one must not opt for a high deductible simply to lower the premiums. Take a judicious decision, ensuring that you are able to pay the amount comfortably out of your own pocket in the event of a claim.
No Claim Bonus
Another important concept of motor insurance is the No Claim Bonus (NCB). The NCB is a discount you get if you do not make any claim during the policy period. It reduces the premium you pay for renewing your car policy. The discount that starts at 20% keeps increasing in proportion to the number of no claim years.
If a claim is made, the NCB becomes null and void. You must remember to claim the NCB you have accumulated while renewing your policy, for discounts on premium. Also, don’t run to the insurer for every minor dent. Compare the premium savings you will forfeit by making a claim with the cost of repair before filing a claim.
Do take out time to research and compare policies before purchasing a motor insurance policy to secure your prized vehicle well!
About the Author Arun Balakrishnan is CEO at BerkshireInsurance.com
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Thanks for giving such an information regarding the car insurance. Thanks Berkshireinsurance for the same..
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