Car insurance policies are of utmost importance to any individual who owns a car. Apart from being mandated by the Indian government under the Motor Vehicles Act, 1988, having a valid car insurance policy offers car owners protection against any liabilities that result in the event of a road accident or theft of their vehicle.
According to a recent ruling by the Supreme Court, all car owners are required to have a minimum 3-year third-party insurance policy. A third-party insurance policy only protects the car owner against liabilities from third parties. A comprehensive insurance cover, on the other hand, provides the car owner with protection against a number of damages, including those caused to third-parties. Furthermore, a comprehensive car insurance policy can be customized to suit the requirements of the car owner.
Apart from purchasing a car insurance policy when you first buy a car, it is also important to renew their insurance policy on a timely basis in order to continue to enjoy the security that it brings.
7 tips for car insurance renewal
The following are a few pointers to keep in mind when renewing a car insurance policy:
1. Choosing a plan
Based on your existing car insurance policy, you can choose to renew it as is or switch to a policy that better suits your requirements. It is important to go over all the types of plans that your insurance provider offers and make an informed decision at the time of renewal.
2. Insured Declared Value (IDV)
The Insured Declared Value (IDV) is the maximum amount that is provided as the sum assured on a vehicle. The IDV is the amount that the insurer agrees to pay the insured in the event where there is irreparable damage to the car or if the car is stolen. The IDV is calculated based on the current market value of the vehicle minus the rate of depreciation. When you renew your car insurance, the IDV of the vehicle is lowered based on the age of the car and the corresponding rate of depreciation.
When renewing a car insurance policy, the riders chosen during the initial purchase can make a big difference in the amount of the premium to be paid and the coverage offered. For instance, if you have chosen the zero-depreciation cover, then the IDV of the car remains the same as it was when the first policy was purchased. This is particularly useful for high-end cars that usually have a higher rate of depreciation than other car models.
4. No Claim Bonus
A number of insurance providers offer the No Claim Bonus cover to their customers. With this type of coverage, the insured receives a discount on the premium on renewal of the policy if no claims were filed during the policy tenure. Usually, insurance providers offer customers 5% to 10% of the IDV as a bonus on renewal of their car insurance policy. A maximum of 50% can be accumulated as a No Claim Bonus against an insurance policy.
In a car insurance plan, deductibles represent a portion of money that is to be paid by the policyholder in the event where a claim is filed. The remaining amount is borne by the insurance provider. Deductibles are categorised into compulsory deductibles and voluntary deductibles. The compulsory amount is that which is set by the IRDAI and is the minimum amount that the insured has to pay in the event where a claim is filed. The compulsory deductible amount does not in any way affect the premium amount charged. Voluntary deductibles is the amount that is chosen by the policyholder above the amount that is set by the insurance provider. If you choose a high amount as a deductible for your car insurance policy, the amount paid as premium is comparatively lower. However, in the event of an accident where a claim is to be raised, a policyholder who has chosen a voluntary deductible is liable to pay the amount set by them, as well as the amount set as the compulsory deductible.
6. Porting Policies
One of the good things about having a car insurance policy is the fact that it is portable. At the time of renewing a plan, if the insured is not satisfied with the terms of the policy, they can choose to port it to another insurance provider. In many cases, customers port their insurance policies when they find that another insurance provider is offering them better coverage and a lower premium and if the claim settlement ratio is favorable.
7. Renewal Quote
The amount quoted by the insurance provider for renewal of a car insurance policy is based on a number of factors. Some of them include the riders chosen with the policy, the IDV, deductibles and the no claim bonus among other factors. When renewing a policy, car owners should ideally evaluate quotes across insurance providers before choosing one that best suits them.
Renewing a car insurance policy is extremely important and should be done in a timely manner. Customers should ensure that they renew their policy before the expiry date because a policy that is renewed after it has lapsed would require an inspection by the insurance provider. Ideally, policyholders should begin the process of renewing their insurance policy at least 45 days before it lapses.