Car and Bike Insurance Buying Guide - Tips to save money and buy right add-ons.

Bought a new Car recently to safely travel around during a pandemic or just for your mobility independence? Or your Car insurance is due for a renewal again? There have been a plethora of options available when it comes to buying Car Insurance, from various banks and Fintech offering multiple plans and add-ons. Some add-ons can just be a trap while some might be necessary add-ons one must buy. 

We try to curate everything here for you - Your A to Z guide on buying or renewing Car Insurance. And yes, Being a community, we always listen to our Dimers. So we share an exclusive Dimer-poll we ran on Telegram on Best and Cheapest Insurance Policy Provider as voted by Dimers.

New Car Insurance Tips

If you are planning to buy a new Car, this section should help you a lot. While one is always super-excited when buying a new car as expected, It's very common for Car Dealerships to take advantage of this “new buyer” excitement. Car Dealership Salesman knows very well that most buyers will try hard to negotiate on On-Road price of car or some ego-fulfilling car accessories but Most buyers simply accept the Car Insurance policy bundled to them with the deal and hence, It's one of the profitable segment on which Dealers make money on you. One can shop around and save a lot of money by taking informed decisions.

There are 2 components of Insurance Policy:

• Third Party Liability Cover - Mandatory for ALL Vehicles. Insures you against damages to a third person or property due to your car.
• Own Damage Cover - Not mandatory but something you would always want to buy for your brand new car.

Both the covers are sold together as Comprehensive Car Insurance Policy.

Manufacturers enroll an Insurance intermediary or tie up with direct Insurer companies/banks and dictate many aspects like Claims, Premium, Servicing etc. They also decide on payouts to be passed to dealers. It's not uncommon that Car dealers sometimes make more money on the sale of insurance policy than the actual sale of the car.

The first step is easy: Don’t hurry on your car purchase. Login online and compare Quotes available online. There are many companies available to check quotes like Acko, Bajaj Allianz, TATA AIG, ICICI Lombard, IFFCO, Reliance General, New India Insurance, GoDigit, Royal Sundaram etc. You need not check prices on every portal but you can simply check on 2-3 websites to get a basic understanding of market rates.

Some examples shown by Web Portal shows that Tata Nexon Insurance is sold for 65K in the showroom while Online price is usually 42K. Insurance for a Mahindra XUV costs around Rs 75,000 in the showroom and about Rs 46,000 in the market.

Once you know the online rate, you can always go back to Car dealer and ask him to match or better the quote. He/she might tell you that the service/claim facility is usually better with blah blah company. In such cases you can ask the name of Insurance company and check quotes online for the same company.

There is no compulsion to buy Insurance from the car dealer, if he does not budge with expensive rates offered. You simply need the car model number, Engine number, Chassis number and you can buy it yourself online. It's a very straightforward and easy process on most portals. The policy is emailed to you immediately and you can forward the same to your Car dealer to complete the process.

One common Myth is “If I do not buy New car Insurance from Dealer, then I can not avail cashless facility or there will be problems with Claims.” This is not true at all. Insurance companies and Car dealers and Car Service centers are all separate entities. A service center will not care if you bought the insurance from the Dealer or direct company/bank.

Understanding Key things about Car Insurance Cover

1. IDV - Insured Declared Value

When buying Car Insurance for a new car or renewing a Car insurance policy, One key thing to look at is IDV or Insured Declared Value of the car. It is the amount your car is insured for and forms the benchmark for all settlements in case the car is stolen or damaged beyond repair. When comparing quotes, it's very important to also ensure that you are comparing the IDV also. Lower IDV automatically translates to Lower Quote. So one must also look at IDV very carefully when selecting a quote.

For a new Car, the maximum IDV is usually set to 95% of Car manufacturer's ex-showroom price. The 5% deduction is usually the depreciation for a new car. For example, If Car ex-showroom price is Rs. 10 Lakh, then you should be buying Insurance cover with IDV of around 9.3 to 9.5 Lakh and nothing below that.

As a car owner, Remember that you have the flexibility to select or Set the IDV within a given range. The lower and upper limits are decided by the Insurance company and varies from one provider to another and hence, its very important to set it at an appropriate value which is not too high and not too low. General rule of thumb is slightly higher IDV is always preferable for newer cars. One must try to find the right balance between optimum IDV and correct premium quote.

2. No Claim Bonus or NCB

No claim Bonus or NCB, as the name suggests, is a reward/discount which Insurance companies give to Car Policy holders for making No Claims in the previous policy year/years. You can also think about it as a reward for being a good customer for the Car Insurance company.

As you would have already guessed by now, This does not apply for New first-time Car owners and is only applicable once you have some historical record about your policy with any Insurance company. However, if you previously owned the car, it's possible to do an NCB transfer using NCB Certificate, if your record is clean.

The reward system starts at 20%, if you have made no claims in the first policy year. It increases 5% to 10% every year and can be as high as 50% discount for 5th year with no claims in preceding 5 years.

Also remember, that NCB belongs to you and not the car. It means that NCB can easily be transferred in case you are changing the insurance provider or even changing your car. You simply need to obtain the NCB Certificate from the Insurance company which is valid for 3 years. (another reason why DIY helps in savings compared to agent or broker or Car dealer who is sometimes in hurry to sell policy)

If transferring NCB from your old car to new car, One also needs to submit Form 29, 30 to a new insurance company along with submitting the NCB certificate obtained earlier.

Also remember that NCB is only valid for Own-Damage and not Third party or Add-ons. If your comprehensive policy cost is Rs. 30,000 and let’s say your own-damage premium is Rs. 21,000 and your NCB is 50%, then you are only entitled to a discount of Rs. 10,500 and not Rs. 15,000.

3. Excess / Deductible of Car Insurance

This is a pre-determined amount the car policy holder (i.e you) have to pay when you make a claim due to damage. This is the amount which you have to pay while the rest of the amount is paid by the Insurance company. There are 2 types of Deductible available:

• Compulsory Excess / Deductible - Amount you have to compulsorily pay in case of a Claim. For cars which are not exceeding 1500 CC, the compulsory deductible is Rs. 1,000. For cars exceeding 1500 CC, compulsory deductible is Rs. 2000. Moreover, for two-wheelers, the amount is Rs. 100.
• Voluntary Excess / Deductible - This is the amount you agree to pay from your pocket in case of claim. This is one of the most powerful tool one can use to reduce premiums if one is little confident about their driving. The general rule of thumb is that one must not make small claims as one would also lose their NCB. If you are sure that you will not make a claim if the servicing cost is say Rs. 5000 or less, then one can opt for a voluntary deduction of Rs. 3000 or Rs. 3500 (based on compulsory premium) and save a significant amount on the premium (20-35% discount on premium, upto Rs. 15000).

Obviously, Voluntary Excess is a “gamble” and since you are telling the Insurance company that you are ok to pay up-front, the insurance company appreciates the same and provides you with a discount. However, we strongly recommend this as 81% of vehicles don't usually make a claim as per Acko. Small claims can also result in loss of your NCB reward, hence its advisable to pay additional Rs. 1500 to Rs. 3000 from pocket and try to reduce premium upfront for little experienced drivers.

4. Cashless Insurance

As the name suggests, This allows you to make a cashless claim. If insurance is not cashless, one has to pay the money to the service center and then Insurance company re-imburses the claim based on bills submitted. One of the common myths or tactics used by Dealers or Brokers is to mention that online policies are not cashless and you have to run around to make a claim etc. Most policies online or via broker or via Dealer are cashless now but one must definiately check this to avoid inconvenience. There might be limited Cashless garages in your city for a particular Insurance provider. So one must definitely check the same.

Understanding Important Car Insurance Cover - Add-Ons

1. Zero Dep Cover

One of the most popular add-on which is offered and one must usually buy is “Zero-Dep” Cover. Zero Dep or Zero depreciation cover or even called “Bumper to Bumper” cover means that there will be no deduction on parts due to depreciation. You get full value of the parts during a claim and have to pay nothing from your pocket.

If you do not have Zero Dep Cover, you have to bear the depreciation cost of parts based on parts and age of the car whenever you make a claim. This cost has to be paid by you.

Let’s take an example to understand better - Let’s say you are involved in an accident and your car is significantly damaged. You take your car to the Service center and the bill is around Rs. 25,500. You decide to claim from your Insurance policy.

If you have no Zero-dep and Let's assume the following breakup of your bill:

1. Air bag - Rs. 4000
2. Tyre - Rs. 3500
3. Fibre Glass - Rs. 5000
4. Glass parts - Rs. 6000
5. Other Parts - Rs. 7000

Let's assume your car is 3 years and 1 month old.

If you have no Zero-Dep in your insurance, you will have to pay Rs. 7000 from your pocket out of Rs. 25,500 . Breakup:

1. Air Bag - Rs. 2000 (50% Dep)
2. Tyre - Rs. 1750 (50% Dep)
3. Fibre Glass - Rs. 1500 (30% Dep)
4. Glass Parts - Rs. 0 (0% Dep)
5. Other Parts - Rs. 1750 (25% Dep due to more than 3 years)

Also note that Zero Dep Cover is only given to cars which are less than 5 years old. Zero Dep can only be claimed twice in a year. It does not cover Oil filters, Coolant system, windshield wiper blades, power steering fluid, transmission fluid as it comes under Consumables and It also does not cover consequential damages to Engine.

Our Recommendation: Always Buy this cover to protect yourself from a very big down-payment or surprise as most accidents would damage the bumper etc. It would increase your premium by 15% to 20% but it's totally worth it.

2. Engine Protect Cover

A comprehensive car insurance policy or Zero Dep policy does not cover the damages incurred on a car's engine or its parts like crankshaft, piston, cylinder, gearbox, etc. Car Insurance company sells this separately as “Engine Protection Cover”. It covers you against damages that may incur to the car's engine because of leakage of lubricating oil, water ingression, hydrostatic lock, etc.

Our Recommendation: Buy this Cover ONLY if you stay in a very flood-prone area. While expenses related to engines are usually expensive, This cover may not be required if there is no heavy water-logging in the area you stay or travel often. This cover is not for the actual engine, which is usually protected by Manufacturer Warranty.

3. Consumable Cover

This add-on, as the name suggests, covers the cost of consumables in case you decide to make a claim. This is again excluded by Comprehensive Policy and has to be bought separately. It obviously covers all consumables or parts which are replaced from time to time like AC Gas, Engine Oil, Lubricants, Brake Oil, Filters like Fuel filter, Air filter, Nuts, Bolts & Screws, Ball bearings, Washers etc. They are obviously used during any claims but the usual cost would come to around Rs. 2000 - Rs. 4000.

Our Recommendation: If you do not usually make a lot of claims, then this cover can be skipped. However, keep in mind that you will have to pay this from your pocket in case you are making a claim

4. Return to Invoice (RTI) Cover

This add-on or cover is usually offered for cars which are less than 5 years old. This cover gives you the benefit of claiming the entire Invoice value amount (ex-showroom price + Registration Charges + Taxes) in case your car is stolen or damaged beyond repair. Kindly remember that standard policy also covers theft/damage but only upto IDV of the car.

One must also remember that Insurance companies can reject your claim, if your negligence is proved. As per recent reports, If you do not have the spare key provided, then the Insurance company can reject your claim based on your negligence. Similarly, if you park your car in No-parking area, then your claim can be rejected due to your negligence.

Our Recommendation: If theft is a serious problem in your region or if you are buying a very expensive car, you can consider this cover.

5. NCB Protection Cover

Some Insurance companies like ICICI and HDFC Ergo provide NCB Protection cover which protects your NCB in case you have to make a claim for no fault of yours. So If someone bangs your car in parking from behind or your car is damaged due to heavy rains or storm, then your NCB stays protected. You obviously pay a premium for the same.

Our Recommendation: Avoid this cover unless you are very confident of your driving capabilities or you already have accumulated 35% or more of NCB and/or you park your car on the road etc.

6. Emergency Roadside Assistance Cover

This Add-on is now usually included in the comprehensive car insurance policy. RSA comes in handy if you are stranded in unfamiliar environments due to car mechanical or electrical breakdown. It allows you to call for towing service at no extra cost to you or arrange for a mechanic to repair your flat tyre or help jump-start your vehicle etc. Some RSA also provides for alternate vehicle, Roadside Fuel delivery etc too.

Our Recommendation: We recommend this add-on as it gives you peace of mind when travelling long distance with your family. If you are only involved in city driving or are on a shoe-string budget, then this add-on can be skipped.

7. Personal Accident / PA Cover

As the name suggests, this add-on protects you from any physical loss or disability due to a major car accident. While Accident cover is always a must, Don’t forget that you would have usually bought this cover also as part of your Life Insurance or Term Insurance Policy.

Our Recommendation: This cover can be skipped if you already have PA Cover in your Life Insurance or Term plan insurance. Otherwise, one must definitely buy this cover.

8. Pillion Rider or Co-Passenger Cover

Similar to PA Cover, this add-on protects your co-passenger from any physical loss or disability due to a major car accident.

Our Recommendation: Buy this cover if you do not have Term plan or adequate Insurance policy for your near and dear ones.

Which is the Best Company to buy or renew?

While this usually depends on city you reside in, the garages available/supported by the Insurance company and also the preferred partners of your Car manufacturer, It's always advisable to talk to your Car Dealer workshop manager once to understand preferred Insurance companies.

As far as value for Money and Reliability of Insurance companies goes, Instead of we giving an opinion, DesiDime community members or Dimers as we call them, can give the best unbiased opinion. We had recently conducted a survey on our DesiDime Telegram channel and the results clearly show the top effective Car Insurance companies you can check your quote at:

Over 1300+ Dimers voted and you can see most Dimers prefer Acko for heir cheaper quotes + Online easy claims. Bajaj Allianz came in Second while ICICI Lombard and HDFC Ergo are the next most preferred partners. There are also other players like Reliance and TATA AIG which we should have maybe included in the poll. However, you can always share your opinion in the comments below.

Conclusion regarding Car Insurance

• Buying a new car? You can always buy Online. Buying via Dealer is not mandatory. Negotiate hard with the Car Dealer.
• Choose your IDV very carefully when buying New car insurance or during renewal.
• NCB or No Claim bonus belongs to you. You can carry forward NCB from old car to new car also.
• It is advisable to opt for small voluntary deductible if you want to reduce your premium. Avoid making small claims as your NCB becomes void.
• Always opt for Cashless facility. Most online Insurance companies give Cashless facility. Don't forget to check supported garages in your city.
  There are many Add-ons available. We recommend to add Zero Dep, Return to Invoice Cover and Engine protect cover if you stay in flood-prone area. Other cover can be added based on personal preference and budget.
• Dimers had voted "Acko" as most preferred / value for money Insurance Provider in  July 2020. Other Insurance provider one can consider are "Bajaj Allianz", HDFC Ergo and ICICI Lombard.