Vehicle Insurance

How to choose the right motor insurance policy and add-ons for your vehicle

Anyone who has had any exposure to driving on Indian roads would agree that accidents are far easier to get into than out of. The data reverberates this fact, with an alarming rate of around 4.5 lakh road crashes each year as per a recent World Bank report. Not just this, the report also states that India tops the list when it comes to road accident deaths, even though we contribute to only 1 per cent of the total vehicles in the world. These numbers sure paint a dismal picture, but they are also a caution light for you to brace up your road journey with a robust motor insurance policy and add-ons.

Given the glaring need for motor insurance in the country, the government had also mandated a valid third-party liability insurance for all vehicles being used in both personal and commercial capacity in 2019. Road accidents are a harrowing experience for anyone and everyone involved. Third-party insurance, which is compulsory by law, covers the damages caused by your vehicle to the third party. But a comprehensive insurance policy guarantees a risk cover for your own unprecedented financial loss as well. Besides, accidents are not the only threat a comprehensive insurance policy covers. It also casts a safety net against hazards like theft or natural calamities.

With COVID-19 restrictions easing out, the vehicles are once again back on roads as usual. This might be the best time for you to re-evaluate your vehicle insurance needs.

Here’s how you can safeguard yourself and your vehicle with the right motor insurance cover and add-ons –

Assess your needs: Third-party cover vs Own damage cover

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 a policy that covers damage to your own vehicle as well. If you have an old vehicle or you do not take to the road quite often, a third-party cover is a good enough option for you. This is because you might end up paying more premium in an extensive policy while you might not need it. For small damages, paying out of your own pocket would be a cheaper option than an extensive policy.

On the other hand, if your vehicle is new or being regularly driven, you should definitely opt for comprehensive coverage in addition to third party insurance. This will not only ensure protection from accidental damages but also risks like flood, fire or theft.

Important add-ons for your motor insurance

Talking of comprehensive coverage, there are some useful add-ons among many others that make your policy truly comprehensive. They come at an extra premium, depending on terms and conditions. Check with your insurer for these add-ons before you buy motor insurance –

Zero Depreciation Cover – Every vehicle undergoes depreciation as the years progress. The insurance policy usually does not cover the depreciation cost of your vehicle. At the time of settlement, the claim is calculated after deducting the depreciation cost. But, adding this cover to your policy helps take into account the depreciation costs as well and get you a higher claim amount at the time of settlement. But this add-on usually covers cars that are up to 5 years old or bikes that are up to 2 years old.

Return to Invoice Cover – Speaking of depreciation, a vehicle is considered depreciated as soon as it is sold out of the showroom. So, in case of a total loss, the policyholder will be eligible to receive the market value of the vehicle, which will be lower than the amount at which it was purchased. Adding this cover to your policy helps you claim the original invoice price of the vehicle in case of total loss.

Roadside Assistance Cover – This cover comes in handy when your vehicle breaks down in the middle of the road and you need immediate assistance. Adding road assistance cover to your policy makes sure that the help you need is just a call away. The insurer will arrange for a mechanic who will help with the needful.

Engine Protection Cover – The engine is the heart of your vehicle and it suffers non-accidental damages while keeping your vehicle up and running. Unfortunately, these damages are not covered by insurance. This add-on helps insure your vehicle against risks like an oil spill, water ingression or mechanical breakdown, etc.

No Claim Bonus Cover – This cover helps keep your no claims bonus intact. No claim bonus in your policy rewards you for making no claims during the policy year. It is essentially a discount on the insurance premium on renewal if there are no claims during a policy year. However, as soon as you make even a minor claim, your NCB lapses and you have to pay the premium in full. The NCB add-on feature protects your bonus in case you make a claim during the policy year.

Check the claim settlement ratio

Before you zero in on a plan, always check out the claim settlement ratio. This ratio refers to the number of claims settled by the insurer against the total number of claims received in a year. Typically, a CSR of 90 per cent or above is considered to be the ideal ratio. Also, you need to make sure that the process of settling the claims should be quick and hassle-free.

You can also customise your vehicle insurance as per your needs. Pick the plan and add-ons that best fit your requirements for protecting yourself and your vehicle.

The author is CBO-GI at Views expressed are that of the author.