Is Dealer-Provided Insurance Always the Best Option?

No, a dealer-provided vehicle insurance policy is not always the best option to choose by an individual. Even though dealer-provided insurance appears convenient, it does not always guarantee the best value or protection. 

This article guides readers through making a well-informed, cost-saving decision about whether dealer-provided insurance is the best option.

The Indian motor insurance sector is projected to have an annual growth rate of 2.11% by 2029. This leads insurance companies to partner with car dealers to provide buyers with a suitable car insurance plan. 

Although the idea of dealer-provided car insurance sounds appealing, here is why it might not always give you the best value:

1. Lack of Customisation and Discount Eligibility
Dealers often issue standardised policy plans that may not consider the driver's history, vehicle security features, or voluntary deductibles. However, getting insurance from a renowned provider can cost you less with good discounts available.

Pro Tip: Select insurers that review your profile, driving history, and automobile safety features. It maximises your chances of obtaining customised coverage and accessing premium discounts.

2. Potential for Hidden Charges-One of the most common disadvantages of dealer insurance is that it can have hidden costs. As much as the bundled payment format (car + insurance) might be convenient, it can camouflage high premiums and admin fees. However, purchasing car insurance from an insurance company of your choice can give you the convenience of 100% cashless claims without hidden charges.

Pro Tip: Asking for a proper cost breakdown is vital before finalising any insurance transaction through an intermediary. Price transparency is necessary when buying directly from insurance firms.

3.Restricted Access to Insurance Providers-One major drawback of dealer-provided insurance is that the choice of insurers is limited. Dealerships typically work with one or two insurance companies that are business-related affiliates, limiting customers' options.

Pro Tip: Always ask the dealer to provide a copy of the insurance to quote and compare it with at least three independent insurers. Compare features, coverage, inclusions, exclusions, and premium differences using reliable online insurance calculator sites before making the final choice.

4. Limited Scope of Coverage-Dealership-provided insurance policies can raise your total insurance cost by 40%. They are usually basic packages with little or no personalisation. Such policies might lack useful add-ons like key replacement cover, outstation emergency cover, engine protection, zero depreciation, or roadside assistance.

Pro Tip: Make a list of necessary add-ons first before settling on an insurance package based on your driving and car use habits. Certain insurance companies provide a No-Claim Bonus of 50% if you do not claim for 5 consecutive years.

5. Complexities in the Claims Process-When insurance is bought from a dealership, the dealer may also serve as a middleman for the customer and the insurer. This extra step may cause delays or some extra charges in the claims process, especially if there are communication gaps.

Pro Tip: Choose insurance companies that provide direct contact with the insurer's claims support unit. This offers quicker communication, smoother processing, and more control at claim settlement.

6. Challenges in Policy Renewal
Renewal of policy at dealerships is also problematic. Without adequate infrastructure and support, the dealers may fail to send reminders in time or make renewal process convenient. This can lead to gaps in coverage.

Pro Tip: Have personal reminders for renewal and opt for insurers offering automatic reminders and online renewal facilities. This ensures uninterrupted coverage and avoids last-minute hassles.

While there is convenience in insurance offered by dealers, it is not always the most affordable or comprehensive type of protection. Limited choice, embedded costs, and limited tailoring can reduce its overall value. Buyers, thus, need to go out of their way to compare policies, identify what their unique requirements are, and buy from independent insurers for best protection and price.