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5 Tips for Buying a Car Insurance for the First Time

Team AckoMay 17, 2022

The elated feeling with the purchase of a new car will remain intact for long if the car is secured with insurance. But, buying the right policy requires basic knowledge of how car insurance works. This could be quite challenging if you are the first time car insurance buyer. Here we have simplified this challenge and created some tips for buying car insurance for the first time.

Tip #1: Get Familiar with Jargons

Understanding commonly-used terms used on the car insurance policy will help you know your coverage better. So, before you begin searching for the right car insurance policy or insurance company go through the following list of auto insurance jargons:

  • First-party and Second-party: The very first thing you will come across when you buy car insurance is your role as a buyer. The owner of the car, who is buying insurance is referred to as First-party. Similarly, an insurance company which is insuring the car becomes the Second-party.

  • Third-party(TP): Third-party is any person who is affected by the insured car, say in an accident. For example, during a collision, owner of the other car in question becomes the third-party.

  • Own Damage(OD): Any damage to the insured car or injuries to the owner of an insured car is termed as Own Damage.

  • No Claim Bonus(NCB): If the owner of the insured car or third-party does not raise a claim in an active policy year, the owner will be entitled for a discounted premium on the next renewal.

  • Insured Declared Value(IDV): The current market value of car is the Insured Declared Value. IDV in car insurance includes depreciation.

  • Add-on/Rider: Additional coverage options available with a Comprehensive Car Insurance Policy.

  • Claim Settlement Ratio(CSR): The ratio of number of claims settled to the number of claim received in one year by an insurance company.

  • Claim: Requesting an insurance company to pay for the insured damage or compensation with respect to the purchased insurance policy.

  • Depreciation: Reduction in the monetary value of the car with time.

Tip #2: Understand Policy Types

Car insurance can be of two types, Third-party Car Insurance and Comprehensive Car Insurance. Third-party Car Insurance is mandatory as per The Motor Vehicles Act, 1988. It covers third-party liabilities.

A Comprehensive Car Insurance Policy provides a wider coverage as compared to Third-party Liability policy. Along with providing a basic Third-party Liability cover, it provides financial protection for Own Damage as well. Plus, events like theft, fire, self-ignition, natural and man-made calamities also form a part of the coverage. Additionally, you can customize a policy with the help of Add-on covers when you buy your first car insurance.

Also, read: Electric Car Insurance

Tip #3: Choose the Right Add-ons

  • Zero Depreciation: With time, the value of a car reduces due to depreciation. However, with the Zero Depreciation add-on, insurer will not consider depreciation at the time of claim settlement.

  • Roadside Assistance: On road facilities like towing, minor repairs, fuel, battery jumpstart, etc. can be availed with this cover.

  • Return to Invoice: In case of total loss of the car, the amount mentioned on the invoice will be compensated to the policyholder.

  • Engine Protection: Covers the cost of repairing/replacing the engine of the insured car.

  • NCB Protect: Helps in retaining the No Claim Bonus even after making a claim. Maximum two claims are allowed with this cover.

  • Consumable Cover: The cost of repairing/replacing consumables such as nuts & bolts, engine oil, etc. is covered with the consumable cover add-on.

  • Loss of Personal Belongings: If you lose expensive personal belongings like a smartphone or laptop, you can raise a claim under this add-on.

Tip #4: Compare Products

Before you buy car insurance online, compare car insurance policies online. Choose similar type of coverage offered by the products and compare various features offered by the company.

Also, Read: 20 Things to Consider When Buying Car Insurance in India

Tip #5: Track Renewals

Once you have bought the right car insurance policy and add-ons, you need to keep a track of the renewals. This is important as timely renewals help in getting a discount on the car insurance premium if no claim is raised against the policy. If you buy car insurance online, it will be easier to track renewals as well.

Equip yourself with the basics we shared above and buying insurance will be effortless each and every time!

Also, read: Vehicle Scrappage Policy in India

Car Insurance Checklist for First-time Buyers

Before we begin with this article, cheers to your first car! As we share your excitement, we will also share with you an important checklist to ensure that you buy the best motor car insurance policy. Here is a list of things you need to do/be ready with while purchasing car insurance for the first time:

1. Car Details

Car details are nothing but the registration number and engine capacity of your car. Engine capacity is also an important factor to calculate the amount of insurance premium.

2. Personal Details

Correct personal details like name, current residential address and details on your driver’s license, need to be on the policy document. Your address will be used to send the hard copy of your policy. Also, entering correct personal details will be helpful at the time of claims.

3. Insurance and Add-ons

Understand car insurance is fairly simple. You can buy either of the two types of car insurance policy, i.e. Third-party Liability or Comprehensive Policy. The difference in these two types of policies is the extent of coverage offered.

Buying a Comprehensive Car insurance Policy is recommended as it offers a wider coverage. It includes coverage for Own Damage, i.e injuries/damages to you and your car, along with a Third-party Liability cover. Plus, you can buy Add-ons for more coverage.

4. Insured Declared Value (IDV)

This is the current market value of your car. To know the approximate value, refer to the following table:

Up to 6 months 95% (of Ex-Showroom price)
6 months to 1 year 85%
1-2 years 80%
2-3 years 70%
3-4 years 60%
4-5 years 50%
5 years+ To be negotiated

5. Deductibles

You need to pay some part of the claim amount as a Compulsory Deductible. You can also opt to pay Voluntary Deductible, but this amount needs to be declared when you purchase the policy.

6. Comparison/Calculator

Thanks to technology, you can do car insurance comparison and calculate the premium amount before purchasing a policy. Use an online premium calculator to know your Car Insurance premium.

7. Insurance Company

Choose an insurance company which provides proper after-sales services. One way to know more about the services is to read user reviews online. Select your insurer once you are satisfied.

8. Payment Details

If you are buying the policy online, you will need your online payment details, including account number/customer id, password/ATM pin and One Time Password (OTP). Make a note of this and get your car insured.

There you go! Refer to this ready-made list while buying insurance and you will buy the policy like a pro even though it is your first time.

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