Vehicle insurance compensates the financial loss incurred by the insured due to an unforeseen incident causing damage to the vehicle and third-party liability, which includes bodily injury and property damage to third parties due to the insured vehicle. Motor insurance comes in two parts. The first part covers the insured’s liability towards bodily injury and property damage of third parties, known as the Third party liability cover, and the second part covers the property damage to the insured’s vehicle, known as the Own damage cover.
The Government of India has made vehicle insurance mandatory for every vehicle plying on public roads. Only the third-party cover has been made mandatory while driving the vehicle in public places. However, the own damage cover is optional.
The main intention behind this is to pay compensation to the affected parties, as, in many situations, the insured might not be able to pay the required compensation to the injured third party without a valid insurance policy. The insured customer is free to undertake the liability of damages caused to his/her vehicle but not the damages inflicted on third parties.
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Here Are the Top 5 Common Mistakes That Should Be Avoided While Buying a Vehicle Insurance Policy:
Insured declared value is the value of the vehicle which is being insured; in other terms, it is known as the sum insured. IDV is made by the insurer and insured in a mutual agreement based on the vehicle’s condition. India’s insurance regulatory and development authority has given certain guidelines to calculate the IDV of a vehicle based on the vehicle’s age, make, model, and variant.
One has to follow the IDV given for a particular model within a certain range. The upper and lower range of the IDV would be given for every model within which the insured has to select the value for his/her vehicle. It is important to note that IDVs would reduce every year as the vehicle ages, and one should choose the IDV carefully to prevent erosion of IDV in the future.
For instance, if you chose to opt for a lower IDV this year, next year, your IDV would be 10% lower than this year, which means the value of the vehicle would be drastically reduced within a short period of time. Had you opted for a higher limit of IDV every year, the value of the vehicle would have fallen over a longer period of time.
The insured declared value could not be changed during the policy period or at the time of claim settlement, so selecting the IDV properly before purchasing the vehicle insurance policy is advisable. IDV can only be enhanced at the time of renewal and not during the policy period. It is important to note that the insurance price will increase in line with the increment in IDV. So, it would be best to balance the IDV and the premium outgo.
The other common mistake to avoid while taking vehicle insurance is the selection of add-ons. Add-ons are additional coverage provided by an insurance provider in exchange for payment of more premiums.
They include zero depreciation insurance that does not include the depreciation amount at the moment of the settlement and consumables coverage that covers the costs of consumables like air filters and oil during the period of the claim, and engine protection insurance that protects the engine caused by water intrusion, etc., as well as roadside assistance coverage to provide help for the insured in cases an accident occurs while traveling.
The add-ons can be customized to meet the demands and preferences of the insured person. Most of the add-ons are offered for 5-7 years, depending on the variant of the vehicle. The most commonly opted add-on is Zero depreciation cover, and the next opted cover is the consumables cover. These add-ons provide extra benefits to the insured customer and are useful during claim settlement.
Having add-ons could increase the claim amount significantly, thereby making less contribution from the customer’s end. It is advisable to take the add-ons after discussing them with your insurance advisor, as taking every add-on would only increase the premium outgo; add-ons should justify the risk.
For instance, if you are in a plain area with no chance of water clogging, inundation, and high security, then it would be less meaningful to take engine protection cover. Once the add-ons are taken, you cannot change them during the policy period. Removal or modification of add-ons will be made only during renewal. Adding add-ons may require you to undergo a vehicle inspection to check the vehicle’s condition.
While buying vehicle insurance, most of us miss out on filling out the proposal form completely. The proposal form is the declaration given by the insured to the insurance company regarding the vehicle’s condition.
Basic details such as the insured’s name, vehicle details including make and model, contact details, and premium payment details should be generated for the policy copy. Once the details are filled in the proposal form, the policy copy would capture the same, and any changes to the policy copy would be through endorsements.
Endorsement can be financial or nonfinancial and sometimes would require pre-inspection. Previous claim details should also be shared with the insurance provider in the proposal form. The claim details form the basis for the award of no claim bonus; no claim bonus is awarded if there is no claim during the previous policy period.
If you try to hide the claim details anticipating avail of the no-claim bonus leading to a discount in premium, you would be served with a recovery notice shortly after verification; failing to pay would lead to policy cancellation or denial to settle the claim. The other details include the KYC documents, which will be provided during policy issuance. Another thing to note is that the policy would be generated in the name mentioned in the RC copy, and any deviation would require approval from competent authorities.
Compare & Buy:
The other mistake one can make while buying vehicle insurance is not comparing. One should compare different vehicle insurance plans in the market and then make the purchase decision. The comparison makes you understand the coverage offered by different insurance companies. Comparison can be done by visiting any online aggregator if you are well-versed in the terminology of motor insurance.
Otherwise, it is advisable to take the help of an insurance broker by booking a call who can understand your requirements and suggest the policy accordingly. Comparison leads to better decisions regarding coverage, premium, and service. You can also go through the reviews to understand the after-sales service of the insurance company and how they respond to the customers’ queries. After-sales service would also depend on the intermediary to a great extent.
This is the reason one should select the intermediary with caution at the time of taking the policy. Insurance brokers such as Ethika insurance broking have a physical and online presence to help customers with vehicle insurance requirements. Intermediaries can advise you on the best insurance plan for your car per your specific needs. It is to be noted that intermediaries can provide multiple quotes from which the insured can choose the best quote.
Out of all the intermediaries, insurance brokers can provide more quotes as they can tie up with many insurance companies. Also, you can compare the deductibles offered under the plan by different insurance companies; higher deductibles lead to lower premiums and vice versa. One should strike a proper balance between the deductible and the premium outgo.
The most important thing one should avoid while buying vehicle insurance is not checking the list of cashless garages in your area of residence or operation. Cashless garages provide claim settlement on a cashless basis which would help the insured customers. Under the cashless claim settlement, the insured must pay the claim amount upfront and later claim it from the insurance company; the insurance company would transfer the amount directly to the garage per the agreed terms and conditions.
The list of cashless garages varies from one insurance company to another; checking the list before taking the vehicle insurance plan is advisable. One should check for the list of garages in their area before taking the policy, as it would be difficult to tow the vehicle to a faraway place to avail of cashless claim settlement services.
The cashless claim settlement service can only be found in cash-free garages with an agreement with insurance firms. Higher the number of cashless garages, the more convenience to the customers availing vehicle insurance.
For more details on vehicle insurance purchase please visit Ethika insurance website and book a call with our vehicle insurance agents who would understand your requirements and suggest insurance plans accordingly.