How to buy cheapest car insurance?

A car insurance is a very important document that supports and helps us from unwanted accidental damage expenses to the vehicle as well as from legal liability arises due to accidental injury to a third person or third party property damage. It also prevent us from heavy challan imposed by traffic police in absence of insurance. 

It is very important for a person to understand the coverage before buying a car insurance. The first thing that come in mind is the value of car that we are going to insured. There is no connection between the actual market value and insured value of a vehicle. Insurance company never consider market value of the vehicle when paying claim to the owner of vehicle. 

There is a standard procedure followed by the surveyor to make depreciation on replaced parts to assess the claim amount when there is a partial loss. 

GR.9. Depreciation on Parts for Partial Loss Claims

The following rates of depreciation shall apply for replacement of parts for partial loss claims in respect of all categories of vehicles / accessories.

1. Rate of depreciation for all rubber nylon/ plastic parts, tyres and tubes, batteries and air bags - 50%
2. Rate of depreciation for all fibre glass components - 30%
3. Rate of depreciation for all parts made of glass - Nil
4. Rate of depreciation for all other parts including wooden parts is to be as -----

• Age not exceeding 6 months - Nil
• Exceeding 6 months but not exceeding 1 year - 5%
• Exceeding 1 year but not exceeding 2 years - 10%
• Exceeding 2 years but not exceeding 3 years - 15%
• Exceeding 3 years but not exceeding 4 years - 25%
• Exceeding 4 years but not exceeding 5 years - 35%
• Exceeding 5 years but not exceeding 10 years - 40%
• Exceeding 10 years - 50%

So, it is very much clear that in case of partial losses surveyor may deduct depreciation as per the aforementioned chart and there is no relation to the insured value.  The insured value is only applicable when there is total loss/constructive total loss means when the possibility of rebuilt/repair/reinstate is not possible or the cost is exceeding 75% of the insured value.   

It is generally advisable that for new vehicle insured value should be the maximum and for old vehicles it should be the lowest cost considering the above mentioned factors. 

Now, we have to first consider insured value as the own damage (OD) premium is charged on that and there after discount and no claim bonus was given on this premium. (Example - Own Damage Premium Rs.1000 - Discount Rs.600 - No Claim Bonus Rs.200=Final Own Damage Premium Rs.200). Please note this is just an assumption. 

Second thing that we have to understand is the premium imposed by Insurance Regulatory and Development Authority of India (IRDAI) for Third Party Liability (TP or Act) to cover Accidental Injury and Property damage to third party. This premium is fixed and no such discounts are allowed on it.

Presently third party premium are as follows..

Up to Cubic Capacity 1000 - Rs.2072

Above 1000 to 1500 Cubic Capacity - Rs.3221

Above 1500 cubic capacity - Rs.7890

Third thing is the Legal Liability (LL) to paid driver which is fixed Rs.50

Forth is 15 Lac Personal Accidental Cover (ODPA) for the owner of the vehicle (in case of an individual person is owner of the vehicle) mandated by IRDAI on order of Supreme Court considering the accidental deaths happened in previous years to provide the benefit to family of the persons. 

So, the final premium payable is OD+TP+LL+ODPA and 18% GST on this as per government norms. 

Now, I believe you may understand that to get the cheapest premium it is necessary to go with the insurance company who is offering maximum discount on OD premium. 

Besides of this the optional covers are very important part of car insurance now a days which are chargeable and vary on insurer to insurer. 

1. Un-named Passenger Accidental Cover - Maximum upto Rs.2 Lac Per Person - Fixed Premium Rs.5 per ten thousand
2. Road Side Assistance 
3. Key Replacement Cover
4. Personal Belongings Cover
5. Nil Depreciation Cover
6. Consumable Cover
7. Engine Cover
8. Tyre Cover
9. Return to Invoice and many more.

We hope this article will help you to understand the basics of car insurance. 

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