CAR Insurance PREMIUM





These measures can help you save on your car insurance premium.

Motor insurance costs roughly 3-4% of the price of the vehicle in the first year. If no claim is made, it will progressively come down to about 1-2% by the fifth year. There are many ways to reduce this cost. For instance, experts advise against filing a claim for minor dents and scratches. It is more cost effective to get minor repairs done on your own than file a claim and lose the no-claim bonus. Here are a few other ways to bring down your car insurance premium.

TRANSFER NO-CLAIM BONUS

You can save big by transferring the no-claim bonus from your old vehicle to the new car. Agents don't tell you this because it hits their business. When you sell your old car, retain the insurance in your name. Take the no-claim certificate from the insurer and reserve the bonus if you are not buying a new car immediately. The accumulated no-claim bonus has to be transferred to the new vehicle within three years of the sale.If you have not made any claim for the past 4-5 years, the premium of the new car will come down by 50%.

OPT FOR A HIGHER DEDUCTIBLE

One way to reduce the insurance premium is by increasing the deductible component.This is the amount you are ready to pay from your own pocket when you make a claim. So, if you opt for a `5,000 deductible and the repair bill comes to `8,000, you will have to pay the initial `5,000 while the insurance company will pay only `3,000. Use this option very prudently.If you opt for a very high deductible only to reduce the premium, you will end up paying too much for repairs.

INSTAL ANTI-THEFT DEVICES

If you instal anti-theft devices in your car (such as a gear lock or a steering lock), the insurance company gives you a small discount of up to `200 or so. But these safety devices should be from authorised manufacturers. If you become a member of certain automobile organisations, there's another small discount offered on the premium.

Some of the add-on car insurance covers are really useful while others don't add much value. Find out which of these you should buy with the base policy.

The importance of car insurance is felt most when you are in a police station to report the theft of your ve hicle or at a workshop to get it re paired after an accident. In both situations, a proper cover would ensure that you don't lose money due to the unforeseen turn of events. Even so, while a standard car insurance policy will reimburse your loss, your wallet will also feel the pinch. There are always some expenses that a comprehensive policy will not fully cover. This is where add-on car covers come into the picture. General insurance companies offer a range of optional covers that give additional cover to your car along with the base motor insurance policy. We looked under the hood of each of these additional covers to understand what they offer and how they work. Some of these covers are really useful and don't cost too much. But some of them are not very useful and can be avoided.

For our calculations, we have used the example of a Maruti Swift LXI model and taken premium quotes from the website of ICICI Lombard General Insurance. The premiums and benefits provided by other insurance companies may be different.

ROADSIDE ASSISTANCE

COST Rs 199

This is a very useful cover, especially if a woman or older person is driving. If the car runs out of fuel, gets a flat tyre or breaks down due to any reason, the insurance company will arrange for fuel, change the flat tyre or get it towed to nearest workshop. "If you have by mistake locked your key inside the car, the insurance company will even arrange for someone to pick up the duplicate from your house and deliver it to you," says Alok Bhatnagar, CEO of insurance portal EasyPolicy.com. All this comes for less than 60 paise per day, so don't even think of not including roadside assistance cover as part of your car insurance. In fact, so useful is this cover that some companies include this as part of the base policy. OUR ASSESSMENT Cheap and useful. Worth buying, especially if a woman or elderly person is driving.

ZERO DEPRECIATION

COST Rs 2.165

A standard car insurance policy will reimburse only the depreciated value of the car parts damaged in the accident. Insurers deduct the depreciated value from the claim.This is not a problem in case of low priced cars because the parts are cheap. But if the car costs upwards of `10-12 lakh, the cost of a new part can be high. A simple plastic bumper can cost `12,000-15,000. But a zero depreciation add-on cover will reimburse the full value of the part. However, cars older than 5-6 years are usually not covered. Also, experts say safe drivers should not spend on this cover. "If you haven't made a claim in the past few years, zero depreciation cover doesn't make sense," says Rakesh Jain, CEO of Reliance General Insurance (see interview on page 13). OUR ASSESSMENT Useful cover for costlier cars.

ENGINE PROTECT

COST Rs 650

COST `650 If you read the fine print of any car insurance policy, you will discover that own damage does not include damage to engine caused by negligence or wear and tear. For instance, if your car is standing in a water-logged area and you turn on the ignition, there is a high chance that your engine can get damaged. Or if you run your car without engine oil, the car can stall. Few people will face such situations, but if you are among this careless lot, take an engine protect add-on cover.This covers engine damage not caused by an accident. Insurance sellers say this cover is worth purchasing because the cost of repairing the engine can be prohibitively high. At the same time, a little basic care exercised by the owner can prevent such damage.OUR ASSESSMENT Cheap but avoidable cover, unless you are the careless type.

CONSUMABLES COVER

COST Rs 866

COST `866 After an accident, car repairs take up a lot of consumables such as engine oil, brake fluid, coolant and minor nuts and bolts. These small expenses can push up the overall bill significantly. Engine oil costs about `2,500-4,000 per fill. Coolant can cost `350-500.Brake fluid adds another `200-250. A standard car insurance policy will not reimburse the cost of these consumables. They are usually excluded in the cover. But for a small price, you can get these items reimbursed. Keep in mind that this cover will be useful only if these consumables are used in the repair.OUR ASSESSMENT Worth considering as consumables are costly.

DAILY GARAGE ALLOWANCE

COST Rs 2000

COST `2,000 How will you manage without a ve hicle when your car has gone for re pairs? For those who are heavily de pendent on one vehicle and in loca tions where public transport is not an option, this can be a tough question to answer.This add-on cover can come handy in such times. It provides a daily allowance of `500 for up to 14 days if the car is in the workshop for more than two days. The compensation amount and the number of days can vary across insurers. But this benefit is payable only if the car is repaired at an authorised garage. Experts feel this benefit is not of much use unless you have no other mode of transportation.OUR ASSESSMENT Costly benefit that most people can avoid.

ACCIDENTAL COVER FOR PASSENGERS

COST Rs 500

COST `500 This is essentially a personal accident cover and provides compensation to passengers in case of death or disability caused by an accident. The maximum cover provided may vary across insurers but the price is usually `125 per `50,000.Bhatnagar feels this cover is not really needed because most people already have medical and life insurance. This add-on can be avoided.OUR ASSESSMENT Not meaningful because insurance cover is too low.

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