The Ultimate Checklist: How To Buy Car Insurance

Rohit has been researching cars for weeks before buying. He compared his options, took his friends’ and family’s feedback, and eventually narrowed it down to the one car he wanted to take home. 

He’s been marveling at his prized possession but forgot one crucial aspect: the right car insurance. Rohit selected the cheapest car insurance option, third-party cover, to meet the legal requirement without much consideration. He drove into a waterlogged road six months later, causing a choked engine. He realised he did not have an engine protection add-on in his car insurance, resulting in repair expenses worth ₹45,000.

The moral of the story? Vehicle insurance is more than a legal formality. It adds to the financial cushion against uncertain expenses. Had he taken a comprehensive plan with engine protection, he could have saved ₹45,000.

Buying the right comprehensive policy with the right coverage gives you access to car insurance benefits like third-party liabilities, breakdown assistance, accidental damages, and more. To ensure you don’t repeat Rohit’s mistakes, you must consider a few essential factors.

In this article, we’ll equip you with a comprehensive checklist and a quick guide on choosing car insurance so you can make an informed decision.

Checklist For Car Insurance

When selecting the best car insurance, there’s no one-size-fits-all solution. Here’s a comprehensive checklist for car insurance that’ll help you find the right fit for your car:

1. Assess Potential Risks to Determine the Policy Type

Start by identifying risk factors that might directly or indirectly affect your car. These include the risk of natural calamities in your area, traffic congestion, cases of car theft, etc. This will help you determine the type of coverage you need. For example, the average traffic congestion in metro cities like Delhi is twice as high as in non-metros like Ahmedabad. This increases the risk of accidents and damage to vehicles.

In India, you can select from two variants of motor insurance – third-party and comprehensive insurance.

Third-party car insurance covers damages caused by your car to a third party. It is mandatory by law and doesn’t compensate you for damages to your vehicle. Comprehensive insurance, on the other hand, safeguards your vehicle from both third-party liabilities and damages to your car.

2. Verify the Range of Coverage

Once you’ve identified your requirements, determine the coverage you need. Remember, cheap does not always mean best. It can help you comply with legal requirements but might leave you with hefty financial bills in the long run.

So, compare your options carefully and review all the policy inclusions and exclusions to ensure comprehensive coverage and maximum car insurance benefits for your prized four-wheeler.

3. Check Add-on Covers

The insurance providers typically offer add-on covers on top of the policy inclusions to help you maximise your car insurance benefits. These may include:

• No claim bonus
• Zero depreciation cover
• Tyre protection
• Engine protection
• Loss of baggage
• Voluntary deductible cover
• Breakdown assistance
• Key and lock protect cover, etc.

Do not miss adding these add-ons to ensure the policy covers everything you need. But remember, these add-ons are only available for comprehensive policies and are mostly paid.

4. Determine the Car’s Insured Declared Value (IDV)

The IDV is simply the current market value of your car. For example, if you purchased a car worth ₹10 lakh two years ago, its IDV may be ₹7 lakh today because of wear and tear over the years. 

It also impacts the maximum sum insured, the amount you will receive in case of a total loss to your car. As a rule of thumb, the higher the IDV, the higher your insurance premium will be and vice versa. So, make sure to select a provider that offers an optimal IDV.

5. Check the Insurer’s Network Garages and Cashless Facility

Insurance providers typically have a network of garages where you can avail of repair services in case of accidental damage to your car. These garages generally offer a cashless facility, which means you don’t have to pay any money upfront when settling claims. Payments are settled directly between the insurance company and the network garage.

So, make sure the provider you select has a wide network of garages near you to avail of cashless facilities for quick and hassle-free car services.

6. Consider the Insurer’s Claim Settlement Ratio (CSR)

Another critical factor to consider when buying vehicle insurance is the claim settlement ratio of an insurance company. It is simply the number of claims settled by the provider against the total number of claims raised in a year. The higher this ratio, the better your chances of getting your claim approved.

However, CSR can also be influenced by fraudulent claims. So, to make a sound decision, you must also check customer reviews and testimonials.

7. Don’t Forget Premium Affordability

Yes, we said cheap is not always the best. But this doesn’t mean you’ll have to create a dent in your finances to insure your car. Compare the coverage offered by different providers against their premiums to identify one that gives you the best value for your money.

While you’re at it, don’t forget to check the deductible clause. It is a percentage of the claim you must pay from your pocket before the insurance kicks in. It can be of two types:

• Compulsory Deductible: This is a fixed amount mandated by India’s Insurance Regulatory and Development Authority  (IRDAI). The mandatory deductible for cars below 1500cc is ₹1,000, and for cars over 1500cc is ₹2000.^[1]
• Voluntary Deductible: This is the amount you can pay out of your pocket voluntarily to reduce your insurance premiums.

Key Takeaways

When you’ve spent hours selecting the best car, why should your car insurance policy be average? Use this checklist for car insurance to thoroughly evaluate your options and choose a policy that offers the maximum coverage at an affordable premium.