Of all insurances, car and bike insurance is the least understood by most of us. When we buy a new car, we quickly take whatever insurance the dealer gives us, but at the time of renewal, a lot of questions come to our mind. Is this the right insurance? Will my claim get approved promptly? Will I receive the full claim amount, or will there be deductions?
Well, worry not, in this blog, I will walk you through everything you need to know about car insurance in India, covering both new purchases and renewals. By the end of this blog, you’ll feel confident about the choices available and the best options for you. Let’s get started.
Types of Car Insurance in India: Third Party vs. Comprehensive
Car insurance in India is generally divided into two main types:
- Third Party Insurance: This covers damages to a third party if an accident occurs but doesn’t cover damages to your car.
- Comprehensive Insurance: This covers both third-party damage and damage to your vehicle. While it provides better coverage, comprehensive insurance premiums are usually higher.
Comprehensive insurance is typically a better option but comes at a higher price. It also comes with various add-ons, which can be extremely useful. Here are some essential add-ons to consider:
Essential Add-Ons for Car Insurance
- Return to Invoice (RTI)
RTI is usually available with comprehensive insurance. It’s a valuable add-on that ensures you get the original invoice amount if your car is totaled or stolen. This includes the car’s ex-showroom price, insurance, and registration costs. Without RTI, you’d only get the insured declared value (IDV), typically around 95% of the car’s ex-showroom price.
For example, if your car has an ex-showroom price of ₹10 lakhs but you got a discount and paid ₹9 lakhs, your IDV would still be based on ₹10 lakhs. This is especially beneficial in the first three years after purchasing the car, as some insurers may not offer this cover after that period. - Zero Depreciation Cover (Zero-Dep)
Commonly known as “bumper-to-bumper” cover, zero-dep is another valuable add-on, especially if your car is five years or newer. Over time, cars depreciate in value, so without zero-dep, your insurer would deduct depreciation from your claim amount. With zero-dep, you receive the full amount without any deductions for depreciation, though your premium may increase by 15-20%. - Consumables Cover
It covers consumable items like nuts, bolts, lubricants, and other small parts that are frequently damaged in accidents. These parts generally constitute around 10-15% of repair costs and are often excluded from standard policies. This cover is affordable, costing approximately ₹500 to ₹1,500, and it can save you significant money on minor repairs. - Roadside Assistance
Roadside assistance helps if your car breaks down, providing emergency help on the spot. This service generally costs ₹2,000 to ₹3,000. However, some credit cards also offer roadside assistance free of charge, which can help you save money on this add-on.
There are other add-ons like engine protection, tire cover, and key replacement. While not essential, these may be useful depending on your specific needs and budget.
Choosing the Right Insurance Provider in 2024
When selecting an insurer, it’s essential to consider their reliability and financial health. Two key factors to evaluate are:
- Claim Settlement Ratio (CSR)
CSR indicates the percentage of claims the company has settled out of the total received. A higher CSR generally means a better chance of your claim being settled. Additionally, check the number of network garages (GAs) the insurer has partnerships with. With network garages, you get the benefit of cashless claims, which makes the process smoother. - Incurred Claim Ratio (ICR)
The ICR is the ratio of total claims paid by the insurer to the total premium collected. An ideal ICR is between 70% and 100%. If it’s higher than 100%, it suggests that the company is paying more claims than the premium it’s collecting, which could indicate financial instability. Conversely, if the ICR is below 70%, it might mean the insurer isn’t paying out enough claims or is charging higher premiums.
To ensure a clear picture, compare CSR and ICR data for the past two years. Companies with an ICR between 70% and 100% and a high CSR are usually reliable options.
Conclusion: Pick What Works Best for You
Everyone’s car insurance needs are different, and what’s best for one person may not be ideal for another. Consider factors such as your budget, driving habits, and coverage needs when choosing a policy. By understanding the types of policies, add-ons, and insurers’ reliability, you’ll be in a strong position to choose the best car insurance policy to suit your needs.