5 Phases You Go Through With Your New Car Insurance Policy

One of the biggest joys in a typical adult’s life is when they get their first car. Be it an economically sound Nano or a fancy Jaguar, the pride and excitement that comes with the RC book are paralleled by only a few other achievements.

Once the novelty of paying for a new car wears off, the responsibilities that come with it comes to your attention. Responsibilities such as buying a new car insurance policy. Like any other important decision that has the potential to save you thousands of rupees in the future, the decision of ‘which car insurance to buy’ includes a lot of steps.

Once you have read this article, you will understand the 5 stages you go through when you have to buy car insurance for a new car and be more equipped to navigate them. But before we get to that, let us first understand why getting car insurance is important.

Why do I need car insurance?

You may be confident enough about your driving skills and feel that you won't get into any unfortunate accidents at any point. However, your confidence doesn’t guarantee that other people behind the wheel won’t make a mistake. Plus, accidents aren’t always caused by human error- think of the damage a fallen tree can cause to your legally parked car? What about theft? Even if you live in the safest of neighbourhoods, there are chances that your beautiful new car could be vandalised or stolen. Hence, it is better to be safe than sorry when it comes to matters of such financial importance.

If you need another incentive to buy car insurance, how about this- under the Motor Vehicle Act of 1988, every vehicle in India must have at least third-party insurance. Non-adherence to the mandate can result in a fine or even jail time for you.

Trust us, going through the 5 stages of buying a new car insurance policy is a lot easier than risking a fine or even jail time!

The 5 phases of buying a new car insurance policy

The journey of finding the most suitable car insurance for your shiny new car begins with an assessment of your own needs and ends with you hitting 'approve OTP' to finalise your policy transaction. Each phase is a question that needs to be answered before you get to the next one. So, let's take a detailed look at what the questions are:

What type of car insurance do I need?:-The most basic question that anyone buying a new car insurance policy needs to ask and answer. You can choose between two types of car insurance policies. They are:

Third-party liability coverage:-The law of the land has made this coverage mandatory to protect the rights of the third party. This type of car insurance financially safeguards you from any liability caused to a third party in case your vehicle causes an accident. Your insurance provider will compensate the third party in case of any injury, disability, death, or property damage caused to a third party, due to your vehicle.

Comprehensive coverage:-As the name suggests, comprehensive car insurance covers third-party liability along with any damages caused to your car. This car insurance covers not only any damages caused to your car due to human accidents but also due to natural calamities. It also covers theft.

Standalone own damage coverage:-The Insurance Regulatory and Development Authority of India (IRDAI) allowed vehicle owners to get a standalone policy for their vehicle, in 2019. This means that the vehicle owner can get a third-party policy cover from one insurer, and a policy to cover their own vehicle's damage from another insurer. This also allows the vehicle owner to only take the third-party cover in the beginning, and wait till they are ready to get a policy to cover their vehicle.

It is advisable to get comprehensive car insurance (or a third-party cover as well as a standalone cover) as it provides greater peace of mind to you; you don't have to constantly worry about parking your car in an unsafe place or worry about the dents caused by other people's reckless driving. However, you may have different needs, and based on that you may want to opt for only third-party liability coverage.

Which is the best plan for me?:-Once you have decided between comprehensive car insurance and third-party coverage, the time for due diligence begins. The insurance price for the new car will depend on a variety of factors starting with the make and model of the car. There are tens of different car insurance policies out there, each with its strengths and limitations. Your due diligence will include comparing the different policies based on factors such as the network of cashless garages that the policy covers; the premium; brand repute; claim settlement ratio. Remember, the insurance price for the new car is not going to be the same across different policy issuers even if most of the factors are the same.

Please note, sometimes, you will want to revisit question #1 based on the plans you come across. For example, if some car insurance provider is issuing a comprehensive car insurance policy for a relatively inexpensive premium, you may revisit your idea of only getting third-party liability coverage.

What add-ons do I need?:-Have you ever feared what will happen if your engine went bust and needs repairing? Or if you are unable to pay your car’s EMI for a couple of months? Fret not; there are certain add-ons available along with your usual car insurance that ensure that you don't have to worry about these things. Some of the popular add-ons offered by the most popular car insurance providers include

• Zero-Depreciation cover
• Engine Protection
• EMI Cover
• Personal Belongings Cover
• Roadside Assistance Cover
• Consumables Cover
• Licence Loss Cover
• Lock and Key Cover
• Registration Certificate Cover
• Tyre Cover
• Lifetime Road Tax Cover

Consult your chosen policy provider to understand more about these add-ons and whether your car is eligible for these.

What is the IDV of my new car?:-The Insured Declared Value (IDV) is the amount your insurance provider will pay you in case your car gets stolen or is damaged beyond repair. In the case of a new car, it is best to get an IDV that is as close to your car's market value. For example, if your new sedan costs INR 10,00,000, then try to set the IDV to as close as that value. Typically, the IDV depreciation for a 6-month-old car is 5%. Please note, the higher the IDV, the higher will be the premium you need to pay.

How do I make the final policy purchase?:-Phew, now you have got to the last stage of the car insurance buying process. At this stage, you know what new car insurance policy you want from which insurance provider, which add-ons you want, and the IDV. The next step is to pay for the policy. The most convenient way to do this is to get car insurance online. All you need to do is provide the necessary details like make and model of the car, engine number, chassis number, details of the RTO the vehicle is registered at, amongst other details. Once the online verification is completed, and you get the go-ahead from the insurance provider, you can make the payment!

That’s it; all it takes to get a new car insurance policy is an internet connection, some time and effort from your end, and your bank details!