Why Your Car Loan Provider Insists on Comprehensive Insurance

Car loan providers insist that you purchase a comprehensive insurance plan to keep the car financially covered during the total loan tenure. With a comprehensive policy, you get broader coverage, keeping the car safe till your loan is repaid.

With over 4.8 lakh road accidents reported in India in 2023, protecting your car with full coverage is crucial. 

You should opt for comprehensive insurance because it offers protection against theft, natural disasters, and accidents, offering peace of mind for both you and the lender. With a comprehensive policy, you get broader coverage, keeping the car safe till your loan is repaid.

Given below are the benefits of a comprehensive policy:
 

1.All-Round Protection

Comprehensive insurance covers both third-party liabilities and own damage. This includes protection against:

 It goes beyond the basic coverage offered by third-party plans.

2.Secures Your Investment

Purchasing and maintaining a vehicle is a costly affair. Comprehensive coverage insurance means that in the event of accidents or complete loss, you won't be saddled with enormous repair or replacement bills. It keeps the asset's value intact without putting a dent in your wallet. 

3.Mandatory for Car Loans

Most financial institutions require it because a car loan provider insists on comprehensive insurance. It keeps the lender's asset secure until the loan is paid in full. Without it, disbursal could be put off or refused, so this insurance becomes necessary during vehicle financing.
 

4.Customisable with Add-ons

A comprehensive policy lets you include covers such as zero depreciation, engine cover, and roadside assistance. These optional covers make your policy more useful by adding extra protection in situations of need, making it more personalised to suit your driving style and needs.

5.Increases Resale Value

A well-maintained, regularly insured vehicle is more attractive to potential buyers. Comprehensive coverage demonstrates a responsible owner and assures that the vehicle is in good working condition. It allows you to negotiate a higher resale value when you decide to upgrade or sell.

Purchasing a comprehensive car insurance policy is a wise decision for every individual owning a car due to the following reasons:

The exclusions under a comprehensive car insurance policy are discussed below:

1.Drinking and Driving

Any damage to the car caused by a driver who is caught drinking and driving is not included in a comprehensive insurance policy. 

2.Driving without a License

A comprehensive insurance policy excludes the damages caused to the car if any driver is caught driving a car without a valid driving license. 

3.Depreciation

If the value of your car depreciates, choosing a comprehensive policy doesn’t compensate for the depreciated value. 

4.Electrical and Mechanical Breakdown

Any electrical or mechanical breakdown of the car causes you to pay for the expenses on your own. The comprehensive insurance policy excludes these costs. 

When insuring a financed car, understanding what affects your premium can help you make informed decisions. Here are the key factors:

1.Car’s Market Value (IDV)
The Insured Declared Value reflects your car's current market value. A higher IDV means a higher premium, as insurers cover greater risk in case of total loss or theft. Use the IDV calculator to determine the IDV for your car. 

2.Driving Record
A clean driving history, that is, free from accidents or violations, often leads to lower premiums. Safe drivers are considered low risk by insurers.

3.Car Make & Model
Luxury or high-maintenance cars attract higher premiums due to costly repairs and increased risk of damage.

4.Safety Features
Vehicles with advanced safety features like airbags, ABS, and anti-theft systems may receive premium discounts from insurers.

5.Coverage Level
More comprehensive coverage, including theft and disaster protection, raises the premium cost compared to basic third-party plans.

6.Claims History
Frequent claims may increase your premium, while claim-free years can earn you valuable no-claim bonuses.

Choosing the right car insurance is just as important as securing a car loan. That is why your car loan provider insists on comprehensive insurance. It helps to protect both your vehicle and the lender’s interest. Overall, it is a smart investment that ensures peace of mind throughout your loan tenure.