Driving Down Motor Insurance Costs

For vehicle owners, motor insurance is a mandatory provision. However, making smart insurance cover choices can prevent the premium from being needlessly jacked up, says Jay Sampat.

Key Points

• The total motor insurance premium will go up when you buy or renew your insurance. This is especially due to the increase in third-party premium, which will be in the range of four-eight per cent depending on the engine specifications of your car/two-wheeler.
• If you are keen on keeping the premium low, opt only for the mandatory, limited liability requirement.
• Before buying add-ons, it is extremely important to tally the policy features with your needs. This will ensure that your premium is not inflated for options that you may never use.

With all costs going up by the day, motor insurance premiums are also getting more expensive. In line with a decision taken last year to review the rates annually, the IRDA has hiked the third-party motor insurance premiums. In addition, some insurers are planning to revise their ‘own damage’ rates. Combine these two pieces of information and what do you have? The total insurance premium will go up when you buy or renew your motor insurance. This is especially due to the increase in third-party premium, which will be in the range of four-eight per cent depending on the engine specifications of your car/two-wheeler.

Bad news yes, but don’t fret yet. There are several ways in which you can keep the total premium on the comprehensive motor policy under control.

For starters, before buying motor insurance for your vehicle, compare the premium rates and benefits offered by various insurance companies, many of which have their own websites. There are also a number of other sites where the motor insurance premiums charged by various companies can be compared. If you have been taking the same policy for the same vehicle for a few years, it may be time to try some other insurance company. It is likely that you come across companies offering still lower rates and discounts.

Vehicle owners have to buy a minimum cover of `6000 to compensate third parties for any damage. While you could buy a higher cover, which proves useful if there is a huge payout, remember that your premium will also rise with the cover. Thus, if you are keen on keeping the premium low, opt only for the mandatory, limited liability requirement.

A few companies also offer a discount of five to 15 per cent to those who provide details about themselves, such as age, gender, marital status, occupation, claim history and driving track record. For example, the premium for a smoking male will be higher than that for a similar-aged non-smoking male.

In addition, one must remember that for every claim-free year, one is entitled to a no-claims bonus (NCB). If you don’t make any claims for a few years, the NCB can enhance your cover by as much as 50 per cent. It is for this reason that you must not rush to make a claim for small damages to your vehicle. Experts advise that if the amount you will spend on repairs is lower than the NCB you are likely to accumulate, you should not avail yourself of the insurance. NCB will come in handy when you are buying a new vehicle, as it is not linked to the vehicle or the policy but to the policyholder.

You could also opt for a higher deductible amount in the policy. Opting for the deductible is similar to foregoing a small claim - the company will pay its share only after you have paid the amount towards the initial portion of the claim.

Some insurance companies offer a discount if you have more than one vehicle and club the insurance policies for them from the same company. (In fact, you are likely to get a cheaper premium if all your insurance cover - like health, personal and household policies - is taken from the same company.)

Some agents try to push unnecessary add-on covers to customers, such as depreciation cover, roadside assistance, emergency expenses, hospital cash, etc. This has become a problem lately, as the detariffication of motor insurance has resulted in products with diverse features and variable premiums, depending on the insurer. Thus, it is extremely important to tally the policy features with your needs before buying add-ons. This will ensure that your premium is not inflated for options that you may never use.

Becoming a member of the Automobile Association of India or its affiliates can make you eligible for certain privileges. Among other things, this will fetch you concessional premium rates from some insurers. Similarly, if you install an anti-theft device approved by the Automotive Research Association of India (ARAI), you could claim a discount depending on the insurer. You can also beat the premium hike by buying your policy online and insuring only the resale value of your vehicle.

Here's something to stop and consider: When was the last time you devoted mental energy to the particulars of your motor insurance policy? Did you just purchase it and forget it? It is incredibly easy to let that happen - and if it has happened in your case, it might be high time to refresh your memory on just where your policy stands. With proper evaluation, you may be able to take a bite out of your insurance bill with a minimal amount of effort. In your own interest, get started at the earliest.