Car insurance is basically a contract between a customer and an insurance company. The insurance provider agrees to pay the customer for the losses defined in the policy, in exchange for the premium that the customer pays.
In India, car insurance is mandated by the Motor Vehicles Act, 1998. Any four-wheeler plying on Indian roads should have a valid insurance policy that provides at least a minimum cover of third-party liability. As indicated above, third-party liability refers to the damages caused by the car owner (while using the insured car) to other people or their property.
So, if a vehicle on the road incurs damage in an accident caused by your car, you need not pay the expenses from your pocket. Instead, a valid motor insurance plan equips you with the ability to raise a claim with your insurance company. If the damage is covered under your plan and there is no indication of fraud, the insurer will pay for the damages.
Although the law states that every car should be insured, the reality is that there are lakhs of vehicles in the country that are not insured. It is highly advisable to spend a few thousand rupees on availing auto insurance, so that you are not putting yourself at risk of extra expenses arising from your involvement in an accident.
Car insurance policies are usually valid for 1 year, following which they will have to be renewed. Policies can be broadly classified into two types, i.e., third-party liability insurance and comprehensive insurance. These two products vary primarily on the extent of insurance cover they offer.
Since comprehensive car insurance offers wide coverage, it is very popular in spite of the higher premiums. It is advisable for every car-owner to be adequately protected through comprehensive car insurance.
Insured Declared Value (IDV) is your car’s current market value. It is also the highest amount that you can receive from a car insurance claim. This includes situations where you have incurred a total loss or damage beyond repair.
The insurance company will arrive at the IDV by assessing the following information:
The insurance premium that you pay is directly proportional to the IDV of the car. So, as the vehicle ages, the IDV reduces and so does the premium. The depreciation is based on the following schedule:
|Age of the car||Depreciation|
|1st year (new car)||5% depreciation is considered. Car insurance is offered at 95% of the ex-showroom price.|
|At the 2nd year renewal||20% depreciation is considered. Car insurance is offered at 80% of the ex-showroom price.|
|At the 3rd year renewal||30% depreciation is considered. Car insurance is offered at 70% of the ex-showroom price.|
|At the 4th year renewal||40% depreciation is considered. Car insurance is offered at 60% of the ex-showroom price.|
|At the 5th year renewal||50% depreciation is considered. Car insurance is offered at 50% of the ex-showroom price.|
|At the 6th year renewal||10% to 15% depreciation on the IDV of the previous year is considered. This amount is deducted each subsequent year. Car insurance is offered appropriately.|
The IDV of a vehicle above 5 years of age is usually based on the mutual agreement between the policyholder and the insurer.
As the owner of a car, you should be aware of its IDV. You should never understate the IDV of your car. Lower IDV implies that you will pay lesser premium on your car insurance; however, you will get lesser insurance cover as well. Similarly, you should never overstate the IDV to increase the insurance coverage.
Insurance companies today offer value-added services such as instant quotes for prospective customers. This helps them understand the exact premium that they will be required to pay for the insurance coverage.
Auto insurance premium is based on a number of factors, some of which include:
Apart from the above factors, your credit history, your driving record, the total distance your car has been driven, and the regularity of your car’s servicing also has an influence on the premium you pay towards auto insurance.
When you are deciding on a car insurance policy, you should keep two things in mind:
As the car ages, its value will go down as well. This translates into a lower premium for the vehicle’s comprehensive insurance policy. However, if you have only purchased third-party liability cover, the premium amount will not vary with the age of the car; it depends on the engine capacity that remains constant.
Buying car insurance can be a daunting task if you are not adept at choosing the right coverage on your own. If you have a relatively new vehicle, then you will find auto insurance salesmen in plenty who would be willing to assist you in the matter. However, it is important that you choose a policy after good research and consideration.
There are multiple third-party financial websites that enable you to compare car insurance schemes, free of cost. You should use this facility as much as possible and compare quotes from multiple insurers to find out who is putting forth the best deal. When you do online research on the offerings out there, you will be better equipped to make a decision. Online policy comparison is also a faster and more convenient method as opposed to discussion with an agent.
Listed below are some things to consider while comparing auto insurance policies:
Several private and public sector insurers offer car insurance plans with a host of valuable add-ons. The public sector companies have traditionally enjoyed the preference of the customer. However, there has been a surge in insurance sales by private players in the recent past.
If you are looking to buy a car anytime soon, listed below are 5 of the top auto insurance companies in India that are worthy of your attention:
ICICI Lombard, one of the top private players, has recorded stellar figures as far as customer satisfaction is concerned. The brand has also received recognitions for its customer centricity and brand loyalty. The insurance company offers the policyholder several attractive features in its auto insurance plan, such as:
A public sector insurer, Oriental Insurance Company, has been the most preferred car insurance provider in India for years. The brand has also bagged most of the prestigious awards in the domain, indicating its robust financial framework and dedication to excel in the business. Additionally, the insurer has:
The company has developed a vast customer base in a short period post inception through its robust distribution network and hassle-free claims service. The insurance company has also received several awards in the past, including that for the deployment of mobile technology in the insurance domain. Key features of the car insurance plan offered by Tata AIG include:
HDFC ERGO is a leading insurance company in India with a customer-oriented approach and a strong distribution network. The insurer also has one of the most competitive claim settlement ratios among private players in the industry. The company is known to settle claims in an efficient manner within the shortest duration. Features of the motor insurance plan offered by HDFC ERGO are:
A public sector insurance company, New India Assurance is backed by strong infrastructure and capital. The brand also has an international presence and is known for the innovative insurance solutions it offers. Today, New India Assurance is undoubtedly a top auto insurance company in India. The benefits of buying motor insurance from the insurer include:
The inclusions and exclusions associated with third-party liability insurance are shown below:
|What is covered||What is not covered|
|Liability for third-party injury - If you cause injury to an individual in an accident, your insurance company will compensate that person.||Injury to self - You will not be offered coverage for your injuries in an accident.|
|Liability for third-party property damage - If you cause damage to someone’s property in an accident, your insurance company will pay for the expenses.||Damages to your car - If your car is damaged in an accident or stolen, you will not receive any compensation from your insurer.|
For comprehensive car insurance, the inclusions and exclusions are as detailed below:
|What is covered||What is not covered|
|Own-damage cover - Apart from third-party liability cover, you can claim for damages incurred by your car in an accident.||Policy not in-force - It is critical to renew your car insurance on time. If your vehicle is involved in an accident after the expiry of the policy and before renewal, the losses incurred will not be covered.|
|Personal accident cover - If you have been injured in an accident, you will receive compensation from your insurer. This will greatly reduce your financial burden during this taxing time.||Nuclear risk and war - If your vehicle is damaged due to radiation, war, terror attacks, hostilities, or invasion, you will not be covered.|
|Coverage against natural calamities - This includes protection against earthquakes, floods, landslides, etc.||Usage of alcohol and other intoxicants - If the driver of the insured car is found to be under the influence of alcohol or drugs at the time of the accident, the expenses incurred will not be covered.|
|Stolen car - If your insured car has been stolen, the insurer will pay the Insured Declared Value (IDV) of the vehicle as mentioned in the policy document.||Consequential damage - Consider a scenario in which you find that there is an oil leak and in spite of that, you drive the vehicle. If the gearbox fails, it is considered as consequential damage. The policy will not offer you coverage in this situation.|
|Man-made disasters - The insurance company will protect your vehicle from man-made hazards like terrorism, strikes, riots, fire, etc.||Deliberate accidental loss - If you stage an accident or perform any other fraudulent activity, the policy does not cover the losses.|
|Malicious acts - Underage drivers, a person driving without a valid license, or driving on the wrong side of the road are considered as malicious acts that are not offered coverage under an auto insurance plan.|
|Commercial vehicle - Insurance companies offer different insurance plans for private and commercial vehicles. If you try to perform any manipulations on this front, your claim request could be rejected.|
Most insurers offer you the facility to include some excluded events on payment of additional premium. The following coverage can hence be added to the base plan:
Consumables are certain substances used in vehicles; these are susceptible to wear and tear or must be replaced regularly. In other words, these items are either consumed completely or are unfit for future use. This includes nuts and bolts, screws, brake oil, engine oil, oil filter, fuel filter, lubricants, ball bearings, grease, air conditioner gas, washers, etc.
A basic comprehensive car insurance plan does not offer coverage for consumables. Insurers offer add-on covers for insuring the car’s consumables. These riders need to be purchased separately by paying extra premiums. These can be added to the base plan to enhance the insurance coverage.
Listed below are certain conditions that apply to the consumables add-on cover:
Return to invoice (RTI) cover is an add-on insurance policy that bridges the gap between the Insured Declared Value of the car and its invoice value. It is an option that will offer you the on-road price of the car (at the time of purchase) in the event of a claim. The cost of RTI cover is about 10% more than the cost of a comprehensive car insurance plan. The RTI cover offers protection against a significant financial loss, such as a stolen car or a vehicle that is damaged beyond repair.
If your vehicle was only protected by a comprehensive car insurance policy, you would have received the IDV of the vehicle as claim payout. The value pertaining to the depreciation of the vehicle would not be offered to you. The RTI add-on policy covers this gap.
Add-on plans offer insurance coverage for several events in addition to third-party liability cover and own-damage cover that a standard policy offers. Based on the type of vehicle you own there is a huge potential for you to save money at the time of a claim. Effectively, add-on plans make your auto insurance work better for you.
The motor insurance add-on covers available in India are as follows:
|Zero depreciation cover||This is one of the most popular riders in car insurance. This add-on entitles you to claim the entire cost of repairing damages that were caused in an accident. You will not be required to pay anything out of your own pocket. Effectively, this cover overrides the depreciation element associated with your car, and gives you the full value of the car as on the date of purchase. This add-on cover is available for cars that are up to 5 years old. Claim under the rider can be recorded up to 2 times during the policy term.|
|Engine protect cover||This rider is particularly useful for owners of new cars and high-end models. Insurance companies usually offer this cover for cars that are less than 3 years of age. The rider offers coverage for all engine-related repairs and is not only limited to accidents. The cost of engine repairs is usually very high. So buying the rider will be very useful if you stay in an area that is prone to waterlogging. Regular wear and tear of the vehicle and negligence on the part of the owner are exclusions under this rider.|
|Return to invoice cover||If your vehicle is equipped with this insurance cover, you will receive the original invoice value of the car (including road tax and registration charges) in the event of its theft or total loss. In effect, this rider does not take into account the IDV of your car; instead it pays you the market value. However, if the same model of car is available in the market at a lower cost than the purchase price, the current price is taken into account. This cover is usually offered for cars that are less than 3 years old. Imported vehicles may not be offered coverage under the rider.|
|Loss of personal belongings cover||This add-on enables you to avail compensation for the theft or loss of personal belongings such as electronic equipments, laptop, etc. from the locked car. The compensation received under this cover can be up to Rs.50,000.|
|NCB protect cover||If a policyholder does not make any claims during a policy year, he/she is rewarded with a No-Claim Bonus (NCB). The benefit is translated into a reduction in the premium for the following year. This bonus can accumulate for several years and amount to a considerable discount in premium. However, if the policyholder raises a claim, the NCB will be reset to the original value. On taking the NCB protect cover, the policyholder can preserve the accrued NCB even if he/she raises a claim. Some insurers limit the coverage under this rider to one own-damage or total loss claim in a year. Vehicles that are older than 3 years cannot avail this rider coverage.|
|Roadside assistance cover||Under this insurance cover, the policyholder will receive services such as towing, refuelling, flat tyre change, arranging for a mechanic, etc. in the event of car breakdowns. The facility is available round the clock as well. Some insurers offer this service at a nominal fee (i.e., as an add-on cover), while others have it in-built with the base plan. Several insurance companies offer this cover only for renewed policies, as opposed to fresh ones.|
|Personal accident cover for passengers||This add-on cover offers compensation to the passengers in the insured vehicle if they face death or partial and permanent disabilities in an accident. The maximum sum assured under this cover is usually Rs.1 lakh per insured member.|
|Daily allowance||If the insured car is stolen or is undergoing repairs in a garage, this add-on cover offers compensation to the driver so that he/she can hire another vehicle. The amount provided each day varies between Rs.500 and Rs.1,000, based on the model of the insured car. The amount is usually provided for 10-15 days. The exclusions under this rider are:
|Consumables cover||If your car is protected with this cover, you can avail compensation for the money you spend on screen washers, nuts and bolts, bearings, engine oil, etc. when you get the car repaired post an accident. Standard motor insurance policies do not offer compensation for the amount spent on these elements. Vehicles that are more than 3 years old are not eligible for this cover.|
|Key replacement cover||If you have opted for this add-on cover, the insurer compensates you for the expense of replacing your lock and key in the event of a theft involving your car.|
You have decided to get your dream set of wheels and are sieving through the discounts offered by manufacturers. You should note that this is the right time to shop for car insurance as well. It is crucial that you buy the right auto insurance policy and add-ons, so that you are adequately covered.
Listed below are few things that you should keep in mind when buying motor insurance:
Get the benefits of buying car insurance online
The digital mode of selling all kinds of goods has seen an astonishing growth in India over the past few years. With the increase in the use of smartphones and strategically designed mobile apps, e-commerce now seems to be at the peak of its potential.
Even the insurance market is able to reach out to its customers through the internet. In fact, the online mode of insurance purchase is most preferred by the digital natives.
Listed below are the benefits of buying car insurance online:
There are many who display reluctance in buying car insurance online. The overall lack of enthusiasm can be attributed to several factors.
Car insurance companies usually request you to furnish the following documents while purchasing car insurance online:
You can buy car insurance plans directly from the website of insurance companies. Alternatively, you can make use of the facility offered by neutral third-party financial websites. The advantage of buying policies from financial aggregators like BankBazaar include:
In an attempt to improve insurance penetration in the country, the government has been encouraging several authorised entities such as online brokers, banks, car dealers, etc. in distributing insurance. In order to understand the distribution landscape better, let us take a look at the main differences between insurance agents, brokers, and car dealers:
|Insurance agents||Brokers||Car Dealers|
|An insurance agent is an entity authorised to represent the interest of the insurance company.||The insurance broker is a representative of the customer, not the insurer.||Car dealers are not licensed insurance distributors. They just act as intermediaries between the insurance company and the customer. They receive a commission from the tie-up between the car manufacturer and the insurance company.|
|The current regulations indicate that a bank or agent cannot represent more than one insurer.||Brokers have a fiduciary responsibility towards customers. This implies that there is a relationship of confidence and trust between the customer and the broker.||Insurance policies bought from car dealers can be more expensive than those bought from brokers or through online modes.|
|Agents are trained and licensed to sell insurance policies, but they cannot be held responsible for the advice they provide. In the event of a misguided advice, the insurance company will be held responsible.||Brokers are ideally supposed to browse through the insurance products offered by various insurance companies and offer you the one that suits your needs. Effectively, they would keep your interest paramount. Brokers have greater accountability, when compared to agents.||It is advisable to look beyond the insurance offered to you by the car dealer. If you shop around a bit, you will certainly find a better deal.|
|An insurance provider can cancel the license of an agent, if he/she has been responsible for wrong advice or other such issues.||A customer can file a complaint in the court against an insurance broker.|
For most, buying a car implies spending a lot of time and effort in narrowing down on the most suitable model. However, not many prospective car owners show that discipline while purchasing an insurance policy for their cars. Most Indian car buyers look to secure the cheapest insurance mandated by law, and in the process they miss out on the most crucial aspects of buying auto insurance. Here are a few mistakes that you should avoid when buying motor insurance:
Deductible or excess is essentially a portion of the claim amount that will be borne by the policyholder before the policy kicks in and pays out the remaining claim value. Deductibles can be classified into two types, i.e., compulsory and voluntary. The main differences between the two are elucidated in the table below:
|Compulsory deductible in car insurance||Voluntary deductible in car insurance|
|This is a fixed amount that is agreed upon at the time of policy inception. This is usually a small amount and is based on the age of the car, model, engine capacity, etc.||This is the amount that the policyholder chooses to bear, based on his/her risk and affordability.|
|The compulsory excess amount is compulsorily paid by the policyholder.||In the event of a claim, the policyholder will have to pay the compulsory excess and the voluntary excess.|
|Premiums will not be lowered on the basis of compulsory deductibles.||The voluntary deductible amount chosen alters the premium for the policy. If you choose a high voluntary deductible, the premium will be relatively lower.|
|This is a mandatory contribution in a claim.||This is a purely optional contribution.|
Deductibles are part of comprehensive car insurance policies. Compulsory deductibles actually discourage policyholders from raising small claims. A high level of compulsory deductibles also ensures that drivers will focus more on road safety so as to avoid damages to the vehicle and subsequent claims.
Individuals who are confident of their driving abilities or those who are able to pay money without difficulty in the event of an accident can opt for high voluntary deductibles. This will help them save a great deal on the premium.
With the recent GST implementation, car insurance premiums have seen a definitive hike. In order to ensure that you get the best deal on your auto insurance policy, you should keep the following tips in mind:
It is crucial to renew your car insurance on time, as it keeps you away from unexpected circumstances and monetary liabilities. If a car insurance plan is not renewed on time, it is referred to as a lapsed policy. An expired policy is not desirable due to the following reasons:
Listed below are steps for renewing your expired car insurance:
Step 1 - Get in touch with your insurance company at the earliest. Your insurer will be able to advise you on the next steps, and even prevent a situation where you may have to bear a penalty.
Step 2 - Do not drive the car until the insurance is renewed.
Step 3 - Renewing your car insurance plan online is a good option, so that the policy will be reinstated within hours. In case you are looking to buy a new insurance policy, you can do the necessary research and evaluate different plans through online comparison tools available at third-party financial websites.
Step 4 - Once you have decided on a plan, contact the insurer to understand about the documentation needed.
Step 5 - Get an appointment for survey of the vehicle at the earliest. This step is mandated by most insurers as your insurance coverage has expired. A representative from the insurance company will review pre-existing damages of your car before providing approval for motor insurance.
Step 6 - Within 24 hours of getting the approval from the surveyor, you should buy the policy.
When renewing your car insurance policy, you should keep your expired policy and a copy of the Registration Certificate (RC) handy. Moreover, you need to be ready with other details such as the city where the car was registered, the address of the RTO, date of first registration, car model number and company, etc.
This list is just indicative; so you should check with your insurance company for the complete list of documentation required.
Renewing car insurance online is a quick and hassle-free process. Listed below are the steps you need to follow for the same:
Another great way to buy car insurance is through the websites of neutral financial aggregators. You will receive expert guidance from these companies in identifying a policy suited for your needs.
Renewing car insurance online is a very convenient method. It is quick, reliable, and highly secure. Moreover, you have the option to compare policies across several insurance companies and select one that is best suited for your car. You should make use of this facility as much as possible.
How to claim on your car insurance policy
With a new car comes a number of added expenses. Some of these include the operating and maintenance costs of the vehicle, which cannot be avoided. An unfortunate incident such as an accident or theft may set you back by a huge amount, unless your car is equipped with a comprehensive auto insurance plan. Read on to understand the procedure for raising car insurance claims in India.
Listed below are certain points to note involving third-party claims:
There may be instances where your insurance company may pay a part of the claim amount but not the entire value. This occurs when your insurer has assessed that the level of damage suffered by your car is not as huge as you have reported. It also depends on the claim specifics, terms and conditions, and the type of coverage.
In order to avoid such a scenario, you should be familiar with the policy terms and conditions before raising a claim.
If you are reporting a claim under motor insurance, you should first get in touch with the insurance company at its customer care number. The details you need to provide when raising a claim are:
Other documents that you need to keep handy are:
The above lists are only indicative. The insurance company may request for additional information or documents, if required. The insurer may also send a representative to verify facts, if needed.
The cashless claim facility was initially a part of the health insurance industry. It has gradually gained popularity and has become an inherent part of the car insurance sector as well. The facility is very helpful to a policyholder who does not have a very high disposable income.
In the event of an accident involving the insured car, the vehicle can be taken to a garage affiliated to the insurance company. Such service centres are referred to as network garages. The repair work done on the car will be completed in an efficient manner and the policyholder is not required to pay the bill. He/she would only have to bear a minimal part of the claim amount that corresponds to deductibles. The final bill is settled between the insurance company and the garage in a quick and hassle-free manner.
Key features and benefits of cashless car insurance include:
Buying used cars is a practice that is becoming very popular in the current economic climate. Transferring car insurance is a part of the purchase process of the used car. The good news is that it is not difficult to do.
When you buy a used car you have to transfer the registration certificate. You must treat this as a very important step in the car purchase process. The transfer of car insurance works along with the car ownership transfer. You can request your insurance company to process the car insurance transfer.
The documents required for the transfer of car insurance are mentioned below:
The NCB is an important aspect that should be given some thought when you transfer a car insurance policy. NCB is a reward given to the policyholder for observing claim-free years. It is not tagged to the vehicle. So, if you are buying a used car the NCB already accumulated on that car’s insurance policy cannot be transferred in your name. The NCB will remain with the previous owner and can be used by him/her on the insurance of his/her next car.
The old car owner will have to request for an NCB retention letter to the insurance provider so as to preserve the NCB. The following documents will have to be submitted when applying for the NCB retention letter:
Once the car ownership is transferred, the insurance policy held by the previous owner is not valid anymore. It is mandatory that the registration and insurance documents are in alignment at the time of a claim.
In India, the insurance of a used car can be transferred to either a new car owner or to a new vehicle owned by the same person. The procedures and documentation for the transfer is the same in both cases. It is advisable to analyse all documents and procedures ahead of time so that there are no issues during the actual policy transfer process.
Understanding the legal jargons in a car insurance policy document is quite a task in itself. To add to that, if you are faced with car insurance theories that do not sound right at all, you should be equipped to weed out the truth from fiction. Listed below are some auto insurance myths that will set you on the right path:
Myth 1 - Buying car insurance is cumbersome.
Purchase and renewal of car insurance can be done easily online at the insurer’s website or at third-party financial websites. It just takes a few minutes for the process. Some insurance companies today also have the Photo Quote option wherein you can submit a photograph of your current policy document and receive an instant quote for policy renewal.
Myth 2 - Car insurance offers coverage only for accidents.
In addition to accidents, car insurance also covers natural calamities such as floods, earthquakes, lightning, landslides, etc. Man-made disasters like theft, burglary, and damage in transit are also covered.
Myth 3 - The car insurance claim process is very inconsistent.
This is certainly not the case. You can raise claims online in a hassle-free manner. In order to raise a claim, the policyholder will have to log on to the insurer’s website and update a claim form. The progress of the claim can also be tracked online. Within 24 hours of claim registration, the insurance company will get back to you for document submission. You will receive the assistance of the insurer at every stage in the claim process.
Myth 4 - If my insured car is involved in an accident, I can claim for an amount equivalent to the cost of a new car.
No, this is not the way car insurance works. When the insurer calculates the current cost of your car (IDV), the depreciation amount is deducted from its original price. So, the maximum amount that you can receive under the insurance coverage is this value of your car post depreciation.
The insurer makes sure that after you receive the claim amount, you will be in the same financial position as you were in before the damage. This indicates that the principle of indemnity rides on the insurance amount.
Myth 5 - My friend was driving my car when the accident occurred. So, he is responsible for the damages.
This is not true. The owner of the insured car will be responsible for all accidents the car is involved in, irrespective of who was driving it at that point of time.
Myth 6 - My personal belongings inside the car are covered.
In an accident if you incur loss/damage to personal belongings inside the car, you will not receive any reimbursement through car insurance.
Zero depreciation cover, also known as bumper to bumper insurance, can be added as an optional coverage to your base car insurance plan. The difference between a comprehensive car insurance policy and a plan with zero depreciation cover is as shown below:
|Parameters||Comprehensive Cover||Zero Depreciation Cover|
|Premium||Varies based on the coverage chosen, the policyholder’s history, and the insurance company.||Zero depreciation cover can be added to the comprehensive plan by paying an additional premium.|
|Claim settlement||At the time of a claim, the sum assured is based on the Insured Declared Value of the vehicle. The value of the depreciated parts are not part of the coverage. So, the policyholder does not receive the entire cost of repair.||If this cover is opted for, the policyholder receives the entire expenses incurred, including cost of depreciated parts.|
|Age of the vehicle||This cover is offered for old and new vehicles.||The zero depreciation rider can be taken only for vehicles that are less than 5 years old.|
There are certain aspects of NCB that you should be aware of in order to utilise it effectively:
The NCB rate grid followed by most insurance companies in India is as follows:
|NCB after 1 claim-free year||20% discount in premium|
|NCB after 2 consecutive claim-free years||25% discount in premium|
|NCB after 3 consecutive claim-free years||35% discount in premium|
|NCB after 4 consecutive claim-free years||45% discount in premium|
|NCB after 5 consecutive claim-free years||50% discount in premium|
Insurance companies spend a lot of money on advertising to lure customers into buying their products. The promise of lower premiums and other benefits may be enticing to the common man. But assess the benefits that you are already enjoying with your current insurer before you think of switching. You may find that the perks of being loyal to your insurance company far outweigh the ones that you are promised by another insurer.
Listed below are some of the rewards that are offered to customers for their loyalty:
Deciding on whether you should stay with your insurance provider or shift to another company is totally based on what you would gain and what you stand to lose.
An endorsement refers to a correction or change made to the existing auto insurance plan. It is useful in cases where there is a change in the ownership of the car, addition of an LPG/CNG kit, addition of optional covers, increase in base policy coverage, removal or addition of electrical accessories, change in the geographical location, etc. The insurance company would not alter the original policy; instead they would provide an endorsement certificate to the policyholder.
Endorsements can be classified as follows:
Car insurance providers offer customers a ‘cooling off’ period of about 2 weeks within which they can cancel their policies. So, if the customer decides to change his/her mind about the current insurer or finds a better deal from another insurance company, he/she can proceed without any obligations in the first 14 days of the coverage.
After the cooling off period has lapsed, the insurer will charge customers a specific amount for cancellation, based on the number of months of coverage already provided. However, customers are usually not offered refunds after 8 months of the policy period.
The cancellation process is quite straightforward. The policyholder has to intimate the car insurance company of the return of policy through email or by calling its customer service desk. He/she would have to send a letter to the insurer with the policy as well. The reasons for policy return would have to be clearly stated in the letter.
Once the request is processed, the cancellation is done within a week.
Most car insurance customers switch between insurance companies at the occurrence of any of the following events:
Car owners are spoilt for choice when it comes to buying auto insurance. Switching to a new insurance company is a simple process that can be done at any time. You do not even have to wait for the current plan to expire before you change insurance.
You can start by evaluating your insurance needs and then comparing policies online for the best rates and coverage. Once you have a new car insurance policy, you should cancel your old policy so that you do not get penalised for late payments on it.
It is recommended that you shop for auto insurance deals every year. At a minimum, you should look out for better deals in the following circumstances:
After you have analysed the various options available to you, you may decide to switch to a different insurance company. At this time, there are certain things you should keep in mind to ensure that the switching process is smooth:
When you request for cancellation of your old car insurance policy and move to a new insurer, there are certain privileges that you cannot carry forward. This includes the following:
Your car is probably your most expensive asset, after your property and investment in financial instruments. Hence, it makes sense to have it insured from theft, natural calamities, man-made damages, and accidents. Third-party liability insurance is also mandatory in India.
However, auto insurance claims are often rejected by insurers. A majority of these rejections are due to the ignorance of the policyholder, or even negligence.
Reading through the terms and conditions in the policy document is an important activity that you should do as soon as you buy the plan. This way you will be equipped with a good understanding of the coverage that really helps at the time of a claim.
Listed below are some of the main reasons for rejection of car insurance claims:
The primary objective of a car insurance plan is to provide you financial protection if any unfortunate incident occurs. When you raise a claim under motor insurance you will be required to furnish your original policy contract. Hence, it is very important that you keep the document safe throughout the policy tenure.
However, if you happen to misplace your car insurance policy document, you have to follow the steps mentioned below:
Insurance providers usually charge a small fee for issuing a duplicate copy of the policy. This amount has to be paid when you submit the application.
Once all the necessary documentation is duly submitted, a duplicate of the car insurance policy is issued within a week. The terms and conditions under the plan, nomination, and policy details will remain the same as that in the original policy.
Under third-party liability insurance, a third-party can raise a claim for losses caused by your insured vehicle, such as property damage, injury, or death. The claim for compensation will be filed against your insurer. There is no limit on the liability claim for injury or death. But the maximum limit for liability on third-party property damage is Rs.7.5 lakh.
If you are the third-party claiming damages from the person responsible for the accident, you have the following options:
If your claim is successful, you will receive the payment from the other person’s insurance company under his/her third-party liability insurance. Subrogation is the act by which the insurance company of one party, makes payment for accident expenses and claims this amount from the insurer of the other party. Subrogation is possible only with comprehensive insurance, and the insurer can decide whether to go for it or not.
Raising a claim under third-party liability insurance is a daunting task. There are three steps to this process:
The complications in the claim process arise when the coverage of both parties are examined. Here, we have listed various permutations of situations when individual X has incurred damages to his car by individual Y’s car in an accident:
|Insurance coverage||Legal solution|
|Possibility 1 - Consider a scenario where X has only basic third-party insurance coverage for his car. He can claim compensation under Y’s third-party insurance. He should also establish that Y was negligent or responsible for the accident in court.||If the court decides in favour of X, he may/may not get the full amount claimed. This is because Y’s insurer will only offer the compensation decided by the court. Also, X cannot claim for the remaining expenses under his own car insurance policy.|
|Possibility 2 - Consider a situation where X has comprehensive motor insurance.||X can choose any of the following options:
|Possibility 3 - Consider a scenario in which both X and Y have comprehensive insurance coverage.||The insurance company of X may not subrogate the claim unless it is a case of disability or death. All ‘vehicle damage’ claims should be ideally settled out of court, as the judicial process can be very time-consuming. Third-party claims for death take a long time to settle as well. In spite of this, if X is keen on approaching the tribunal he can do so. He should be able to furnish all documents required for the proceedings.|
It’s important you should have a general idea on how to negotiate your car insurance claim with the insurance provider. You should be aware of the fact that insurance companies usually try to minimise the amount that they pay out as claim settlement. If you are overwhelmed at the thought of negotiating with your insurer, you can always seek the assistance of a good lawyer. You can also avail the service of an attorney if you have been refused a fair settlement.
The following pointers will help you negotiate an auto insurance claim in a fair manner:
Based on these factors, decide on a minimum amount that you will be able to accept as settlement. A car insurance attorney can help you in this assessment as well.
The insurer would most probably offer you an amount that is lower than what you have demanded; so you should ask for compensation that is about 25%-75% more than what you would settle for. It is crucial that you have documentation that would support everything in your demand letter. Else, you may not get the entire amount that you deserve.
In this scenario, you should ask the insurance adjustor to justify why the claim amount is so low. Respond to each of the points in the reply letter with proof of your expenses and why you cannot accept the proposal. You may also make a counteroffer that is reasonable and one that the insurance company is willing to accept.
Policyholders often make the mistake of considering car insurance claim settlements as a smooth process. But expecting that the insurance company would honour your claims in a straightforward manner is naive. You should know that there are bound to be problems from the start to the end. You should also be prepared to deal with these problems as they come.
Listed below are some car insurance problems that may delay a claim settlement:
Many people are of the opinion that filing a car insurance claim will have an adverse impact on their premiums in the future. Based on the circumstances under which the accident took place, you car insurance rates may increase or decrease when you file a claim. Let us take a look at the various types of claims and the corresponding impact on premiums:
GST has been referred to as the largest indirect tax reform in the history of independent India. After the GST implementation on 1 July 2017, in a memorable midnight ceremony at the iconic Central Hall of the Parliament, insurance products have become more expensive. This includes hike in car insurance premiums as well.
As per the previous tax regime, car insurance products were charged service tax at the rate of 15%. Currently car insurance is charged GST at 18%, an increase of 3% in premium. So for instance, if you were paying a premium of Rs.10,000 before 1 July 2017, the service tax on it would have been Rs.1,500. This amount was paid in addition to the actual premium value. After GST implementation, you will be required to pay Rs.1,800 as GST. This implies that you will be paying an additional Rs.300 towards your car insurance policy.
Insurance frauds usually involve raising false claims. However, there have been instances where the policy bought by the customer was fake. This phenomenon is more common in the car insurance domain when the policy was not bought from a registered agent.
It would be very disappointing to discover at the time of a claim that the insurance policy you purchased was a fake one. Let us look at the ways in which you can avoid this misfortune:
Consider that you have installed an LPG/CNG kit in your vehicle. Your insurance agent may not be aware of it, and hence, these may not be specifically mentioned in the application form. At the time of raising a claim, you will face difficulties for not having disclosed details about the LPG/CNG kit. Hence, it is important that you read the policy document thoroughly and declare customisations or safety features that you have added to your car.
It is also advisable to buy insurance directly from the insurer or from a reputed online insurance broking company. The advancement in technology has made online car insurance purchase easier and more flexible.
When driving on Indian roads, it is important to carry the following documents:
Usually, it is sufficient to carry the photocopies of the above documents. In case you are travelling outside the state of registration of the vehicle, you should carry the original documents.
Car insurance premiums vary based on different factors, and each insurance provider has its own yardstick for determining it. The premiums basically depend upon the insurer’s assessment of how risky the driver is, the cost the company incurs while conducting business, and the amount of claims the insurer would pay out during a financial year. Other factors that insurers use to determine the premium are:
Insurers attribute different weightage to these deciding factors. Since every insurance provider rates a driver’s risk according to its own criteria, the quotes may vary significantly.
Some companies may offer promotional rates to customers from time to time. This will also reduce the premium by a substantial amount.
You would have to inform your car insurance provider of the change in address. The insurer will not change the address in the original policy. Instead, it provides you an endorsement certificate. This would fall under the category of non premium bearing endorsements.
If your car insurance policy is in-force and you have observed a claim-free year, you are eligible for a No-Claim Bonus. Using this bonus, you can get a reduction in premium for the next policy year. If you plan to sell your car, you can get an NCB retention letter from the insurer that will preserve the NCB for 3 years. Within this time, you can use it on the insurance of another vehicle that you own.
Car insurance applications are rarely rejected. Usually the insurer will offer you a policy with modified terms at an extra premium. If the customer suffers from a serious illness that is not permanent, the insurer may request him/her to submit the application after a few months. The policy will then be offered at a higher premium as well.
In case an insurer has rejected your application, it is unlikely that another company will approve it. When you apply for a car insurance policy, the application form itself will have a column where you will have to update whether you had applied for a policy before and if there were any instances of rejection. In case the second insurer approves your policy application, you will be charged a premium that could be two to three times higher.
When you purchase motor insurance, you will have to pay the premiums on the due date. Most car insurance companies offer flexible payment options that will be suited to everyone’s budget. If you are unable to pay the full amount in one go, you can opt to make regular payments at monthly, quarterly, or half-yearly frequencies. When a premium payment is due, you will be notified of the due date and payment amount. Some insurance providers offer you the option of paying online. This way you can benefit from not having to pay the service fee.
There is no set rule on how auto insurers process claims, so the procedure may differ greatly. However, most insurers undertake the following steps when processing claims:
For cashless claims:
For reimbursement claims:
In both the above cases, it is crucial to file an FIR after the accident and submit it to the insurer to support your claim.
In auto insurance, a customer pays a fixed sum of money to the insurance provider in exchange for financial assistance at some point in the future. However, the service may not be rendered at all.
Car insurance companies make money through a clever combination of risk management and the use of funds in a strategic manner.
So consider an instance where a policyholder gets into an accident that results in a payout of Rs.1 lakh. If the policyholder has paid premium that amounts to Rs.12,000, this would indicate that the insurer is at a direct loss of Rs.88,000. But in reality, the insurer does not incur such a loss because managed risk spreads this financial burden over the remaining members of the group, who haven’t raised any claims.
After the GST implementation on 1 July 2017, the total amount you pay for auto insurance has risen. This is because the service tax on the premiums paid earlier were 15%. Now that the service tax has been replaced by GST, the rate charged is 18%, an increase of 3% in total premium. In addition to that, the Insurance Regulatory and Development Authority of India has recently indicated that car insurance premiums will rise by 16%-50% in 2018.
No, car insurance claims are not public records, these are business records that can be obtained through a subpoena.
Taxability of a motor insurance claim payout depends on whether the amount received is ‘capital’ or ‘revenue’.
The tax implications of car insurance payments are as follows:
All auto insurance policies have a defined policy period. This is the duration for which the coverage is active. The start and end-dates of coverage are specified in the policy documentation. A policy term does not automatically begin at the start of a calendar year. The policy term for car insurance in India is 1 year and it depends on when the coverage under the plan commences.
Increase in car insurance premiums can be classified into two categories:
For vehicles that were purchased on or before 31 March 2010, i.e. old cars, the PUC Certificate will have to be renewed on a quarterly basis. For all vehicles purchased from 1 April 2010 onwards, i.e., new cars, the PUC Certificate will be valid for 1 year.
There is no restriction on the number of auto insurance claims allowed in a year, as long as the policy is in force. However, there are restrictions on the number of claims raised under add-on covers such as zero depreciation, NCB protect, etc. You can check the policy terms and conditions for more details.
South Korean carmaker Hyundai is likely to launch a new compact car in India next year. Recent masked images of a car undergoing trials have come up on the internet, with some enthusiasts of the opinion that this model could be a new version of the Santro.
The Hyundai Santro has been a popular brand in India, having been in production for 16 years from 1998 to 2014. If the rumours are true, it would bridge the current gap in Hyundai’s line-up, positioning itself between the Eon and the Grand i10.
It is expected that the new car will be priced around Rs.4 lakh, with Hyundai aiming to deliver on mileage and efficiency. The company is revamping its portfolio in the country, with 8 new cars expected to be launched over the next three years.
22nd November 2017
Maruti Suzuki, which has been one of the most preferred cars in the country, will be receiving a generation change with the car manufacturer releasing an all-new model that will be making its debut next year at the 2018 Auto Expo. Since the model has almost reached the end of its life-cycle, the car manufacturer has launched a new limited edition Swift variant in the country. The petrol version of the car is priced at Rs.5.45 lakh, while the diesel version is priced at Rs.6.34 lakh. The customer-friendly hatchback will be getting a range of feature upgrades and enhancements on the limited edition variant of the model.
22nd November 2017
Online insurance giant Coverfox Insurance Broking Pvt.Ltd who managed to generate twice the revenue for the year 2016-17 from Rs.2.64 crore to Rs.6.12 crore, has also managed to shrink its loss compared to last year. The company has managed to reduce its net loss to Rs.31.85 crore to Rs.35.07 crore. Coverfox was founded by Devendra Rane in the 2013, it offers Health Insurance, Home Insurance, Car Insurance and Travel Insurance through online facility.
20th November 2017
Tata Motors is offering discounts between Rs.2,000 and Rs.81,000 on certain models from their line-up, this month. The Tata Safari Storme is being offered with a discount of Rs.81,000. Vehicle buyers can also avail benefits amounting to Rs.78,000 on the purchase of a Hexa. These benefits include corporate offers, insurance benefits, and an exchange bonus.
Prospective buyers can also avail a discount of Rs.28,000 on the purchase of the Tigor, a compact sedan. The petrol-variant of the sedan comes with added insurance benefits. The Zest, which is another compact sedan, is also being offered with discounts up to Rs.63,000, as per the colour availability of stock, and variant. The Tiago is being sold with a corporate benefit of Rs.2,000. These offers, however, will only be valid until 25 November 2017.
17th November 2017
New India Assurance, which was recently listed, announced a net profit of Rs.748 crore for the second quarter of the fiscal year, which ended on September 2017. This was a 187% increase from what the company reported as their net profit during the corresponding period of the last fiscal year. Based on their performance, the company’s board has announced an interim dividend of 75%. The company’s profits increased due to an improvement of the combined ratio. With the addition of the investment income, the insurer’s recent adjusted combined ratio came up to 91.45%. According to the company’s chairman, the firm’s health insurance and motor insurance portfolios are expected to improve in the near future. The insurer has recently partnered with Punjab National Bank, Bank of India, Bandhan, Canara Bank, and South Indian Bank to increase their distribution channels.
16th November 2017
Renault, one of the top automobile brands in India, announced the launch of their new initiative this Thursday. The initiative is to offer after-sales service nationwide called Renault Winter Camp. The after-sales service camp will be held across India at all the Renault service facilities, starting from November 13 – November 19, 2017. The intention behind the Renault Winter Camp is to assure that the cars give an optimal performance even during the winter season and to reinforce the bonding between Renault and their customers by ensuring utmost care. The camp has dedicated, highly trained and competent service technicians to provide the expert attention and care needed for the cars.
The service camp offers a car check-up to Renault owners adhering to the guidelines provided by Renault India. The car check-up includes a detailed examination of all primary functions of the car. These occasional checks assure necessary actions for enhanced performance of the car and provide customers a rewarding ownership experience with the brand. In addition to the car check-up facilities, a host of additional facilities will also be provided to the customers. The workshops will organize interesting activities to engage customers, enhancing the overall customer experience. Other facilities include providing attractive and exclusive plans for insurance renewal, 15% discount on selected accessories, parts and other value-added services.
14th November 2017
A consumer court has ruled that auto/motor dealerships that charge extra handling fees, in addition to what is fixed by the government, will have to pay a hefty fine since this will amount to unfair trade practice. In a recent complaint by a distressed consumer against a car dealer that compelled the complainant to pay additional charges, the consumer court granted a compensation to the tune of Rs.1 lakh to the complainant for the mental suffering that they had to go through. The auto dealer was forced to pay this amount to the consumer as a fine.
13th November 2017
General insurance firm, HDFC ERGO, has launched a self-insurance application that will enable motor insurance policyholders to instantly renew their insurance policies without having to get their vehicle inspected by a company-authorised surveyor. This user-friendly application is expected to be launched in December. In order to use this service, individuals will have to first log into the insurer’s official website or mobile app.
Once the user is logged in, they will have to key-in certain details, after which they will be able to choose between the traditional surveyor inspection and self-inspection options. If the user selects ‘self-inspection’, an SMS will be sent to the user’s mobile with the link for the self-inspection application. After the user installs the application, they can proceed to record a 45-second video of their vehicle along with certain required photos. These photos will have to be uploaded by the user, and they will then be verified by the insurer.
9th November 2017
According to a recent report, automobile sales during Diwali piped down this year.The big players in automobile industry like Tata Motors, Maruti and Mahindra informed that the sales growth staggered to a single-digit when it came to car sales during the festive season.
Recently, Hyundai's sales in India dropped marginally. Similarly, Ford also witnessed sales drop of 44% while it was planning to launch the updated model of EcoSport, one of the best selling SUVs in India.
Swift, Dzire and Baleno mainly drove the sales this season with utility vehicle and compact SUVs sales that increased by 29.8% from last year. However, most of the mini segment cars saw a decline in their sales by 4.2% from last year.
Although, Toyota (TKM) reported a 6.45% increase in domestic sales than last year, Mahindra saw only a marginal growth in their sales.
Overall the automobile industry has had a mixed sales forecast this festive season.
6th November 2017
Police in Cyberabad issued a notification that vehicles without proper third-party insurance coverage will be seized from now on. Cops have also issued a 15-day ultimatum for all citizens to get adequate insurance coverage for their vehicles. This announcement comes amidst rising complaints that many vehicles in Cyberabad do not have the necessary third-party insurance coverage.
Rather than charging the violators with a fine or citation, confiscation of vehicles is likely to prompt more people to follow proper regulations with regard to insurance coverage. According to the order, confiscated vehicles will be released only after providing proof of adequate insurance coverage.
Cyberabad police commissioner Sandeep Shandilya cited the order of the Supreme Court as the reason behind this move. Section 146 of the Motor Vehicles Act of 1988 makes it mandatory for all motor vehicles in India to have third-party liability insurance.
6th November 2017