Renewing Your Car Insurance Policy For the First Time? What You Must Keep in Mind

Most car owners rely on the automobile dealership to give them the right insurance policy when they are taking it out of a showroom. However, once they have owned the car for one year, the onus of renewing the policy lies on them. Here are some key points to pay attention to while renewing the policy for the first time.

While renewing your car insurance , you will first have to select the best insurance policy. To do so, there are a few key factors that you need to pay attention to:

• Claim Settlement Ratio: The claim settlement ratio would tell you the percentage of claims that the insurance company has successfully completed.
• Garage Network: Make sure the company you choose has a wide network of garages and at least includes a few of your preferred garages for car repair.

• Switching the Insurance Company: If you are changing the company, you must look at a few factors to select the right company;
• The Correct IDV: IDV or Insured Declared Value is the amount the insurance company promises to pay if your car is stolen or gets totalled. It is essential to choose the right IDV as per the IRDAI (Insurance Regulatory Development Authority of India) guidelines. Have a look at the table below:

• If you are renewing it for the first time, it will mostly be in the bracket of 1-2 years old. Thus, the correct IDV of your car will be its listing price minus 20% depreciation. While you can keep it lower than this, it will decrease the market value of your car, which might impact you negatively in the future if you wish to sell it.
• Inclusions and Exclusions: It is important to evaluate the inclusions and exclusions of each policy before you decide one.

Add-ons provide you with an extra cover which may not be included in the main policy. Some of the add-ons that you must consider for your fairly new car are:

• Return to Invoice Cover: In this, the insurance company pays you the amount that you paid for your car and not as per your IDV in case your car is stolen or gets totalled.
• Zero Depreciation Cover: If you take this add-on, the insurance company will pay for the entire body repair of your car in case of an accident. However, you may still have to pay a few charges, such as consumables (nuts, bolts, engine oil), processing fee, etc.
• Consumables Cover: In this cover, you don’t have to pay for any consumables items used during accidental repair such as nuts, bolts, screws, lubricants, etc.

Apart from this, there are a few other add-ons to consider, such as:

• Tyre Cover
• NCB Retention Cover
• Engine Protection Cover
• Key Damage Cover

Do note that with every rider added to your policy, the premium will go up.

If you haven’t filed a single claim in the past one year, you claim a No Claim Bonus discount which is applied to your ‘own-damage premium’ component. It keeps on increasing for every claim-free year but comes to zero for the next year if you file a claim in any year.Here is how it increases year-on-year:

Thus, if you haven’t filed a claim in the first year of owning a car, you can get an NCB discount of 20% on the damage premium.

Many car owners choose to make modifications to the car in order to personalise it or customise it according to their own taste. If you have done so in the past year, it is important to notify these changes. Failing to mention these changes can make your policy stand void. Some of these changes are:

• Changing the paint colour of your car
• Making modifications to the car’s structure
• Making modifications to the car’s engine
• Installing/removing an alternate fuel system such as a CNG kit
• Removing a pre-installed anti-theft device

Car insurance renewal

The process can be overwhelming for new car owners, but if you follow the right steps, it should be a smooth breeze for you. Once you have renewed the policy, make sure you check it thoroughly for any discrepancy. If you do notice anything, bring it to the attention of your insurance company quickly and get it rectified. Keep these tips in mind and choose the best insurance policy for your car.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.