Vehicle sales are up year on year, particularly following a period of low demand during Covid. Potential purchasers should seek for the correct insurance coverage to protect their ‘vehicle’ as they decide on the suitable model of cars and two-wheelers. In the thrill of a purchase, it’s tempting to leave the choice about vehicle insurance on the back seat or to choose the cheapest alternative.
Insurance purchases, like any other investment, may have a beneficial long-term payoff if done properly. This blog article will attempt to outline three essential aspects to bear in mind while purchasing auto insurance.
When you decide to buy a car or bike, the dealer salesperson starts with a lengthy sales spiel about the vehicle, its accessories, and your financing choices before moving on to insurance. In a traditional type of mental depiction bias, the price of insurance appears little in comparison to the cost of the car, making it inexpensive and a trivial rounding-off oversight. As a result, it is a quickly signed-on choice. However, if the price is assessed in a more relaxed situation, the amount spent on insurance provided by the dealer should definitely be reviewed. It is generally safe to assume that insurance given by a dealer is often more expensive than the price listed online. But it doesn’t mean it can’t be written off.
Consideration No. 1 – Trade-offs for an online buy:
While online insurance policy might be less expensive, insurance bought through a relationship channel of sale (the one given by the dealer) can have better claims rates. In essence, the decision between purchasing online or in-store should be a trade-off conversation between cost of buying and a speedier claim process. Neither point can be generalised or quantified. Online insurance may also provide digital (and hence speedier) inspections for claims under Rs. 50,000, and when pushed for options and negotiated with, point-of-sale insurance can be cost-effective. This is dependent on the insurer, dealer relationships, and buyer understanding. While neither is a recommendation, an insurance buyer should be mindful of cost-benefit compromises in order to make a well-informed selection.
Consideration No. 2 – Focus on the Base policy:
Third-party insurance is required by law for the first three to five years of ownership of the vehicle. This solely covers third-party losses, as the name implies. Damage to the car or the driver is not included. Own Damage (OD) includes theft, natural disaster damage, road accidents, and other wreckage (except regular wear and tear) to automobiles and is thus necessary, albeit not required by law. Even for individuals who drive often, accidents are inevitable and should be insured by their personal damage coverage. Natural catastrophe protection in OD is also becoming increasingly vital, because of dense metropolitan areas that are prone to floods, and automobiles that are parked in low-lying regions, including basements of buildings. (A general suggestion – In the event of flooding, do not start the engine until it is entirely dry, otherwise you risk flooding the engine, which isn’t going to be covered.) Also, while purchasing insurance, it is advantageous if the IDV (Insurer Declared Value) is as high as possible to make sure that, even if the value depreciates year after year, the beginning value is greater.
Consideration No. 3 – What about add-ons?
Zero depreciation is a common automobile insurance add-on. When a claim for damage is settled, depreciation is added to the amount. However, because the policyholder must face the price of a new item regardless of depreciation, this add-on removes depreciation and compensates the entire cost of damage. Return to invoice add-on is a version of Zero depreciation. In the event of total damage or theft, a ‘return to invoice’ add-on guarantees that the insured is compensated to the amount of the invoice, which includes registration and road taxes. Switch-on/off insurance plans (not an add-on, but an option) allow policyholders to ‘switch-on’ insurance only while the vehicle is in use, ensuring a cost-optimized insurance premium based on use. Based on the usage, one may choose engine safety, key and lock insurance or other choices. Paid-driver coverage and other solutions are also offered to chauffeured owners.
As I have stated in previous blog-posts, the points mentioned above are not the only ones to consider. There may be more alternatives available to you, but the points highlighted above are a good place to start when considering the subtleties of vehicle insurance when buying a new vehicle.
