Team AckoJun 4, 2021
India is going through a digital revolution powered by the convenient combination of affordable smartphones and internet availability. This has impacted several industries in a positive manner; the insurance industry is one such example. As a result, buying and renewing car insurance has become easy.
The emergence of digital-first insurers and the inclination of traditional insurers to adapt to the online ecosystem has made the entire insurance experience convenient, especially for people looking to buy or renew car insurance online.
Nowadays, the process to buy/renew car insurance is a lot faster, easier, and simpler as compared to a decade ago. Excessive form-filling and document submission have been replaced by straightforward purchase journeys and instant policy issuance. For example, you can insure your car on acko.com within the time taken to cook instant noodles!
However, there are certain red flags that you must be aware of to make the most of your insurance purchasing experience. Some mistakes can be detrimental to the objective of insuring your car in an affordable manner.
This article is all about understanding 15 common mistakes to avoid while buying or renewing car insurance. Read ahead to know about these mistakes so that you are in a better position to make an informed call as far as insuring your car is concerned.
This section will educate you about things to be wary of at the time of insuring your car. Out of the 15 points, you might be aware of a few and might come across some unknown aspects. The key takeaway after going through all the points should be to avoid the stated mistakes, think logically, and stay insured with a cover that you want. Note that they are not in any specific order.
Shopping for an insurance policy is similar to shopping for any other online product or service. Some kind of basic research is a must when you are looking to buy stuff online. Will you think of purchasing a mobile handset from an unknown website or turn to a trusted e-commerce website for the purchase? The trust factor is crucial, right?
When it comes to buying or renewing car insurance from an online insurer, you can verify if the insurer is a certified entity. This can be done by browsing the website and looking for the Insurance Regulatory and Development Authority of India (IRDAI) registration number and CIN number. You can also check the insurer’s social media profiles for authenticity, to know the brand ethos, and find out customer reviews. Do not resort to buying or renewing car insurance in a hurry. Say no to panic buying and yes to basic research while buying or renewing car insurance online.
Not comparing yourself with others can be a good life mantra. However, when it comes to car insurance policies, not comparing policy quotes and inclusions can lead to inadequate insurance coverage. It is suggested to spend some time comparing policies to know that you are getting a good deal. However, you need to be analytical while doing so. Just because a Comprehensive Car Insurance Policy is being offered at a low cost doesn’t mean you jump at it. You should check the cover associated with it as well.
A low-priced policy can mean lower Insured Declared Value (Amount to be paid by the insurer in case of Total Loss; more on this later.), fewer features, and lower coverage. However, this is not true across the board. Digital-first insurers are known to offer low-cost policies with high-cover packages along with better services related to customer support and claim settlement. This is where comparing plans can ensure that you get the ideal car insurance coverage at an affordable rate.
The purpose of insurance is to have financial backing in case of unfortunate events. When it comes to car insurance, there’s another purpose as well—the need to comply with the law of the land. If you own a four-wheeler, you must insure it with at least a Third-party Liability Policy (TLP). This plan offers a minimalistic cover and as a result, is cheaper than the Comprehensive Plan.
Opting for minimal coverage in the form of TLP will surely help you to meet legal requirements but not insurance needs. Such a cover does not offer an Own Damage cover. It will help you out in case you damage someone else’s car but not offer any assistance in case your car is damaged. For that, you need a Comprehensive Plan, which is more expensive than the TLP. But isn’t that the essence of an insurance cover? Financial support when your car is damaged? Think it through.
Change can be difficult for some people. However, not changing and being rigid can be disadvantageous as well. Online policies are known to be affordable and convenient to buy as compared to offline policies. There are a host of advantages that come with the online buying infrastructure. Prominent ones being anytime purchase, anywhere purchase, and no paperwork.
If you are someone who resists the online world because you are not used to it or find it daunting, then you can call the online insurer’s customer support team and express your apprehensions. They will help you out. Maybe you can ask help from someone who is used to the online world to help you buy insurance online. Also, it is never too late to learn new things. Purchasing a policy online is super simple.
Car theft is a disaster. No one expects their car to be stolen, especially if you take great care to park it in a safe place every time. However, things can go wrong. But if you have installed an anti-theft device (ATD) in your car, you are making the thief’s job all the more difficult and increasing the probability of not losing your beloved car to theft. ATDs also help to lower insurance premium.
If you have installed ATDs certified by the Automotive Research Association of India (ARAI), then you can get a discount on the premium. You need to convey to your insurer that you have secured your car with a certified ATD. As this reduces their risk to an extent, they can offer a discount on your Comprehensive Plan.
Also Read: Reasons for Car Insurance Claim Rejections
Add-ons offer enhanced coverage and services but you have to pay extra to avail them. Add-ons can help you get a better claim pay-out, enhance your convenience quotient, or simply drain away a lot of money. The latter happens when there is not much thought put into buying add-ons along with a Comprehensive Plan.
Buying too many add-ons can increase your premium to a great extent. On the other hand, not going for any might result in inadequate coverage. This is where there is an add-on imbalance. You need to analyse your insurance needs and then take a call. For example, if you use your car daily and are worried about what to do if it crashes midway, then a Roadside Assistance Add-on is a must. A Zero Depreciation Add-on, which negates depreciation calculation during settling claims, is beneficial for cars that are relatively new—one to five years old. Alternatively, a Passenger Cover Add-on is a waste of money if you drive solo.
The Insured Declared Value (IDV) of a car is a vital element in the Comprehensive Plan’s premium calculation process. It is the value of the car in the present, not the invoice value, not the resale value. IDV is the amount that is arrived at after considering the depreciation cost of the vehicle. It is also the sum insured amount that the insurer gives to the policyholder in case the car is in a Total Loss (irreparable, lost due to theft) condition. Here, insurers often offer a range to the policyholders from which they can choose the IDV.
Choosing the IDV impacts two things: sum insured and the premium. Higher IDV means a higher sum insured and a higher premium. Lower IDV means lower sum insured and lower premium. These are two extremes. Ideally, you should be somewhere in the middle and achieve IDV balance.
Accurately managing the No Claim Bonus (NCB) component of a Comprehensive Plan is a great way to lower your payable premium. This bonus is a renewal discount. It is offered to those who have remained claim-free during the policy period. The insurer offers this reward to the policyholder for staying claim-free during the policy period.
NCB is incremental if you do not raise a claim for five consecutive years. In such a case, the discount can be up to 50% on the Own Damage component of the policy. Therefore, if you are in a position where you are thinking of raising a minor claim, you need to base that decision on the accumulated NCB or the NCB that you stand to gain by not raising a claim.
Whether you opt for a feature or not is a different story, but it is vital to know about the feature so you can make an informed decision. Voluntary Excess is one such feature that you need to be aware of while buying or renewing a Comprehensive Car Insurance Plan.
Voluntary Excess is also known as a Voluntary Deductible. A Deductible is an amount that the policyholder needs to pay in case of claim settlement. There is a Compulsory Deductible and a Voluntary Deductible, which is on top of the compulsory one. By opting for a Voluntary Excess, you essentially tell the insurer that you will contribute a fixed amount in case of a claim. For this, the insurer reduces the premium. However, you need to be cautious while selecting this Excess/Deductible as going for a higher amount with an eye on lower premiums can mean that you shall receive a lower claim pay-out.
It is crucial to be truthful while sharing personal information at the time of purchasing a policy. Not only that, but you should also be transparent while answering the questions put forward by the insurance executive at the time of a claim. Insurance is based on mutual trust. The insurance company goes by the Policy Wordings and it is expected of the policyholder to share truthful information as and when required.
Some people tend to hide information or offer misleading information to reduce the payable premium or receive more money at the time of claim settlement. Performing such activities can be disadvantageous for you. If they are against the law, you can be arrested for being a part of illegal activities.
For example, some of the activities that you must avoid are claiming for a previously damaged part by stating it got damaged due to the current accident, not sharing truthful information about claim history, hiding information related to car modifications, etc. However, if you happen to make a mistake while buying car insurance, you can contact your insurer and get it rectified at the earliest.
Insurance companies start informing policyholders about their upcoming renewal date almost four weeks in advance. While some might consider such notifications annoying, they are in fact beneficial.
If you find yourself in a position where you receive such a notification, it is prudent to renew the policy at the earliest. Or at least, make a note of it in the form of a reminder on your mobile phone. Renewing a car insurance policy before the expiry date is of utmost importance. Not doing so will mean that your insurance cover will cease to insure you the moment it lapses.
If you are caught by the authorities without a valid car insurance policy, you can face monetary penalties. Unfortunately, if your uninsured car is involved in an accident involving a third party, it can also lead to legal complications, even jail time.
As mentioned in the previous point, you should refrain from letting your car insurance policy expire. However, in the case where it is inevitable, you must ensure to keep the gap between expiry and renewal to a minimum. If the gap is a huge one, it can directly impact your insurance premium.
If the insurance company feels that a lot of time has passed between policy expiry and policy renewal, they might want to inspect the vehicle before insuring it. Such an inspection is an expense for the company. It is likely that the insurance company will increase the payable premium after such inspection.
Having a gap also affects the accumulated NCB and in turn impacts the payable premium. This is because you will lose out on your accumulated bonus if the gap is more than 90 days. As a result, you will not be eligible for a renewal discount and would be required to pay a comparatively higher premium.
If you feel you are getting a better cover or better service elsewhere, you can switch to a different insurance provider. You can also switch from one kind of policy to another. However, you should purchase a new plan and then cancel the existing policy. Not the other way around. In most cases, your previous insurer will ask for a new policy to cancel the existing policy, unless you plan to sell your car.
Keep in mind that if you cancel your existing policy and fail to start the new policy immediately, your car will be uninsured during the interim period. This can leave you exposed to risks without any cover and make you vulnerable to legal hassles as per The Motor Vehicles Act.
Online car insurance has made buying a policy child’s play. You can buy a policy under five minutes and quickly move on to do something else. However, there is a crucial step that you need to follow after receiving your Policy Document—you need to check it and verify the details mentioned in it.
Sometimes, there can be an error in the policy. Such an error can prove costly in the long run as claims can be rejected due to them. Verify details such as name, address, vehicle number, cover, and expiry date. If there are any issues, speak to the insurer and get it rectified without wasting any time.
Car insurance is a contract, which has certain terms and conditions. You need to be aware of these terms and conditions (T&Cs) before buying/renewing a policy or at the time of raising a claim. Such details are mentioned in the Policy Wordings of the respective policy. It contains details regarding the insurer’s liability in case of a claim.
Going through the Policy Wordings can help you set your expectations straight regarding the insurance cover and claim settlement. If you find any of the content stated in the Policy Wordings to be confusing, you can get in touch with the insurer’s support team and ask your doubts to them. Do not leave any doubt unanswered. It is important to make an informed decision when it comes to buying a policy, especially if you do not know much about it.
Go through the following section to know the answers to some common questions related to buying car insurance.
I had purchased a Third-party Liability plan for my car from my car dealer while purchasing the four-wheeler. Now, I want to switch to a digital insurer and buy a Comprehensive Plan. Is it possible?
Yes, it is possible to switch insurers and covers. The right time to do so would be while renewing your policy. You can visit www.acko.com and insure your car in minutes.
Will I get a discount on the payable premium for a Third-party plan if I install Anti-theft Devices in my car?
No, Anti-theft Device discount is only applicable for Comprehensive Plans.
Is there a limit to the number of add-ons I can pick?
There is no limit as such to the number of add-ons you can have. However, you must be practical while buying add-ons. Be selective in choosing only those add-ons that enhance your coverage.
I think I made a mistake in the car insurance buying process by not stating the claim history accurately. How can I rectify my mistake?
You can rectify your mistake by contacting your insurer via call or email. They will verify your request and make the changes via the policy endorsement process.
What is the difference between Insured Declared Value (IDV) and Resale Value of a car?
IDV of a car is crucial from an insurance premium calculation perspective. It has a direct impact on the payable premium and the sum insured in case of Total Loss. The resale value of a vehicle is completely based on the seller’s discretion. IDV can be understood as the current value of the car. But it can be resold for a much higher value than the current market value to make a profit.
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