Team AckoOct 20, 2021
Renewing a car insurance plan is an annual event and not a one-time process. A car owner must buy sufficient coverage each time. This is crucial as insurance will provide a financial safety net in case of unfortunate events. Some car owners buy the cheapest plan available. Is this way of selecting a car insurance plan good or bad when an unfortunate event like an accident or natural calamity occurs? Let's discuss this in detail.
The purpose of car insurance is to secure yourself and others with a financial backup in case of damage or injuries. This is why buying car insurance is mandatory. To be specific, buying a Third-party Liability Car Insurance plan is compulsory if you wish to drive legally on Indian roads. If you don't have a valid policy, you are liable to pay fines. And these fines skyrocket after the recent change in rules.
You could be fined for at least Rs. 2,000 if you are found driving without a car insurance policy. Buying the lowest-priced car insurance is not the answer to avoid fines. In fact, as a car owner, you will end up paying way more money for repairs and the treatment of injuries in case of accidents, theft, total loss, fire damage, etc., if you have the basic policy.
Consider Mr. A bought the basic Third-party Car Insurance plan for his Mercedes-Benz S-Class. The cost of this basic policy is, say, Rs. 10,000, and the Comprehensive Plan was for Rs. 30,000. Note that the repair cost of this luxury car is high and not covered with insurance under a Third-party Liability Plan.
One day he got into an accident with a third party and injured two people. He tried to control the car but ended up hitting the pole of a street light.
In this case, the cost of treating third-party injuries was covered by the insurance company. This cost was around Rs. 2,000 for each person.
The repair cost of Mr. A's car was Rs. 85,000, and this was not covered under his insurance policy. Therefore, Mr. A had to bear this entire cost by himself.
If Mr. A had invested Rs. 30,000 to buy a Comprehensive Plan. He would not have had to spend the entire Rs. 85,000 to repair the car from his pocket.
Thanks to online insurance, you can now compare car insurance plans side-by-side and buy the one you think is the best. Sometimes, car owners opt for the cheapest plan without considering the features or the benefits offered by the insurance company. As mentioned earlier, this can pose a huge threat to your finances, and you may end up paying a large sum of money for seemingly low-cost incidents.
The following list of reasons will help you understand how buying a cheapest car insurance policy will be problematic in the long run.
The services you receive in a time of crisis i.e. an unfortunate event, are determined from the coverage of your car insurance policy. You will be left exposed to financial obligations if the coverages of your policy are inadequate.
For example, consider you selected the most basic type of Comprehensive Car Insurance plan. You went on a drive, and the car stopped in the middle of the road. You have no idea what is wrong with the car. You go online and contact a random mechanic who takes a long time to reach the spot. Now you are stranded on the road with a broken car. When the mechanic arrives, he asks you to get the car towed to his garage, which is a hassle as now you have to arrange and pay for the towing service also.
Instead of buying the cheapest available car insurance plan, consider buying the Roadside Assistance Add-on along with your Comprehensive policy. It will be helpful in case of a breakdown. Many other services like a flat tyre, fuel refill, towing service, on-the-spot repairs, etc., are offered under this add-on. Simply contact your insurer in case of a car breakdown and the rest will be taken care of.
Cheap car insurance plans have limited features, and this can lead to situations where you need to arrange or pay for things more often—for example, setting the desired IDV (Insured Declared Value) while buying a plan. The insurance company may set the IDV to a fixed amount that you cannot change. Another example is the unavailability of car insurance add-on coverages.
IDV is one of the major factors that help in calculating the car insurance premium. The higher the IDV, the higher will be the cost of your policy. Sometimes, insurers decrease the IDV or don't let you set the desired amount just because they want to sell a cheap car insurance policy.
Say your car's IDV is Rs. 5 Lakhs, and the insurer has capped the IDV at Rs. 3 lakhs. In case of total loss (irreparable damage to the car), your claim will be settled for Rs. 3 Lakhs (excluding deductibles). Here, you bear a loss of more than Rs. 2 Lakhs.
Always set the correct amount of IDV while purchasing your car insurance plan. It helps you in case of theft or total loss where the insurance company will settle the amount approximately equal to the IDV. Buying such a plan may increase the premium; however, you will benefit financially in case of extreme damage or theft.
Buying the cheapest car insurance plan can give a feeling of buying something at a discount. But the price you pay in case of an unfortunate event can bring much more losses as compared to buying a feature-rich plan at a slightly higher price.
Consider Mr. B and Mr. C are very good friends. They always buy cheap motor insurance plans because they feel they drive safely and never raise a claim. Mr. B bought the basic Third-party Liability Car Insurance plan, and Mr. C bought a cheap Comprehensive plan that had a high voluntary deductible* value.
*Voluntary Deductible is a share in the claim amount that is borne by the policyholder. It reduces the claim amount, and the policyholder must spend money to cover the remaining cost of repairs.
Mr. B and Mr. C decided to go on a vacation and unfortunately got into an accident with a third party where their own cars were also damaged. Mr B had to pay the entire cost of repairing his car as per the basic Third-party Liability plan, and Mr C had to pay a high deductible.
Always select a Comprehensive car insurance plan without any voluntary deductible and avoid going for the lowest car insurance plan. This can help pay third-party compensation as well as your car's repair costs.
Investing in the best car insurance policy will help you get a solid financial cover when you face an unfortunate event related to the car. This will reduce your financial stress and help you get the best services under car insurance. Here are the top five tips for buying the best car insurance plan.
Tip 1: Note down your requirements before selecting your car insurance plan.
Tip 2: Check the online reviews and testimonials of the insurance company on social media handles.
Tip 3: Buy a comprehensive plan and choose only those add-ons that are suitable to your needs.
Tip 4: Check the current market price of your car and set the IDV in this range.
Tip 5: Avoid waiting till the last moment to buy or renew a car insurance policy. If possible, always buy the plan a week in advance and set the start date accordingly.
Also, Read: 5 Tips to Reduce Car Insurance Premium
Below are some common questions related to buying a cheapest car insurance policy.
No, in fact comparing plans will help you find the best policy as per your needs. You can compare car insurance quotes, features, and value-added services offered by different car insurance companies.How to get cheaper car insurance policy online?
Please visit ACKO to get an affordable car insurance plan at an affordable price.Why does the cost of my car insurance policy reduce each year?
The cost of your car insurance policy reduces each year because the value of the car also decreases due to wear and tear with time. This is called depreciation.Does buying car insurance online help in reducing insurance prices?
Yes, buying car insurance online will help in finding a good plan at a lower price.Should I buy third-party car insurance online?
Yes, you can buy any type of available car insurance plan online. However, buying only the Third-party Liability Insurance plan may not provide adequate coverage.
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