Tuesday, May 29, 2012

Keeping Automobile Insurance Premiums in Check

Do you own a bike or a car? If so, you would’ve definitely purchased some sort of Motor Insurance on your vehicle. How did you purchase that Insurance? The dealer from whom you bought your bike/car had tie-ups with some XYZ Insurance Co and added the policy by default to the on-road price of your vehicle. Dint he? And from the subsequent year, you just paid the policy renewal premium amount that was sent to you by the Insurance Co without spending much time on this whole Vehicle Insurance fiasco…
If this is what happened to you, you must definitely read this post which will help you bring down your Automobile Insurance Premium.

What is Automobile Insurance?

Well, you all know what this is. In the event of any accident, the Insurance Company will pay for the damages & repair to your vehicle. Also, if you had third-party insurance, the Insurance Co will also pay the accident victim. For this facility, you pay an annual premium depending on the car you own. Owners of high-end luxury cars like a BMW or a Mercedes usually pay annual premiums that workout to approximately the price of a small hatchback :-). Nonetheless, the price of your car plays a big role in the annual insurance premium you pay. Irrespective of the car you own, the following ideas will help bring down your Insurance Cost…

Idea No. 1 – Buy only what is required by Law

As per the Indian motor vehicle regulations, there are certain minimum insurance requirements you need to purchase. There is a Mandatory Limited Liability requirement which every vehicle owner must purchase. Obviously you could buy a higher cover but this will also drive up your annual insurance premium. So, keeping all the liability requirements to the mandatory minimum will keep your premium amount to the minimum levels as well.

Idea No. 2 – Drive Safely

There is no better idea than this. Every year that passes by, where the customer does not make any claims on the insurance policy, he is eligible for a No-Claims Bonus or NCB. NCB will help reduce your annual premium by around 10 to 20% if you are a safe driver and haven’t made any claims in the previous year. For ex: If your annual insurance premium was Rs. 10,000/- last year and you did not make any claims, in all probabilities, the renewal premium amount this year will be around Rs. 8,000/- to Rs. 9,000/- because of the No-Claims Bonus.

An important point to note here is that, this NCB amount differs from one Insurance Company to another. As a general average, you can expect your premium to go down in the range of 10-20% every year if you don’t make any claims against your Insurance Policy.

Idea No. 3 – Opt for a Higher Deductible

The Deductible amount here is the amount you will pay towards the vehicle repair. For ex: let’s say you opt to pay 20% of the cost in case your vehicle meets with an accident, the Insurance company will have to pay only the remaining 80% which means lesser liability for them and hence lesser premiums for you. A point to note here is that depending on the Insurer, this deductible amount you can choose will vary. Always try to go for the higher deductible if you are confident of your driving skills. 5 years of accident free driving will save you more than enough money to fund the 20% cost of your vehicles repair if it happens. So, follow Idea 2 and drive safely and follow Idea 3 to bring down your insurance premium considerably

Idea No. 4 – Don’t buy unnecessary Add-On Covers

These Insurance Agents try to sell you almost anything and everything you just don’t need. When I was buying the Insurance Policy for my car, the Insurance agent was giving me add-on covers like hospital cash, emergency roadside assistance and so on.
Do you think he is going to give these things for free? Absolutely NOT. He is going to charge me additional premium for all these facilities. Here for ex: My Car Dealer offered free road-side emergency assistance for the first 5 years on the model of car I bought. So, taking this emergency roadside assistance add-on was overkill for me. I had medical insurance and they will take care of my cash requirements in the event of an unfortunate injury. So, the hospital cash add-on too was overkill for me. By avoiding these add-ons I avoided paying a few hundred bucks extra as premium.
So, think carefully before selecting these Add-on covers. Buy only what you need. Remember Idea No. 1?

Idea No. 5 – Install an Anti-Theft device approved by the ARAI (Automobile Research Association of India) in your vehicle

Most Insurers offer a small discount on the Insurance Premium if you have installed an anti-theft device approved by the ARAI. Not only is this device going to help you in the event of your vehicle being stolen, it will also help reduce your yearly premium as well. So, check if your Insurer offers this benefit and if so use it. Otherwise, go ahead and install the device and switch over to an Insurer who offers you this discount.

Idea No. 6 – Try to Buy your Policy Online

Online Policy Purchases are usually cheaper than in-person purchases because, the Insurer doesn’t have to pay any fee/commission to the Insurance Agent/Salesman. In turn, they pass on this saving to the customer by means of a lower premium.
But, an important point to note here is that, while buying online, make sure you read every single detail reg. the policy. Going behind lower premiums, we wouldn’t want any surprises in the unfortunate event of our vehicle meeting with an accident

Idea No. 7 – Don’t Rush to Make Claims

I know certain people prefer to make Claims against their Insurance policy even for minor damages on their vehicles. For ex: My colleague had parked his car just beside a Coconut Tree in a Restaurant in East Coast Road in Chennai during one of our Project Party outings. A coconut fell on his car bonnet and caused a dent. It was a simple accident and my friend had to shell out Rs. 1000/- to fix the dent on his car. He filed an Insurance Claim along with all necessary documentary proof and claimed Rs. 900/- after the 10% deductible and was boasting about it. His rationale was, “Why am I paying Rs. 25,000/- as premium every year on this car? Let the Insurer pay at least this 1000 rupees”

What did he do wrong here?

Do you remember Idea No. 2 about driving safely and the No Claims Bonus? Since my colleague made a claim of Rs. 1,000/- he will not be eligible for the No Claims Bonus this year. Assuming he hadn’t claimed this 1,000 rupees he would’ve been eligible for the NCB. Assuming a minimum 10% premium reduction (Actual might be even more) he would have saved Rs. 2,500/- in next year’s premium. By claiming this Rs. 1,000/- he missed out on saving Rs. 2,500/- in annual premium.
Which option would’ve been wiser? Claiming Rs. 1,000/- or Saving Rs. 2,500/- in insurance premium? I would go with option 2 and am sure so will you…

Idea No. 8 – Always Renew Your Policy on Time

Most Insurance Cos will let your policy lapse if you do not pay your policy renewal premium within a certain no. of days after the policy’s expiry date. If the policy lapses, you will be asked to go for a fresh policy which will cost you more than what it would if you renewed your policy.

A couple of years back, I forgot to renew my bike’s insurance policy. The previous year my premium was Rs. 850/- and I got a letter than this year’s premium was Rs. 700/- after the NCB. I thought of taking care of it later and totally forgot about it. The due date passed and the policy lapsed. The Insurer forced me to buy a new policy as my earlier policy lapsed and I had to pay him Rs. 800/- for the same policy. I had to pay Rs. 100/- extra because this was a new policy and not a policy renewal. Had I been more careful, I would’ve saved this extra 100 rupees. Though 100 rupees might sound like a small amount, imagine the loss if I owned a Car instead of a Bike and my premium was Rs. 8,500/- instead of Rs. 850/-

Hope you will use all these ideas to reduce your Automobile Insurance Premium…

Happy Insuring Your Vehicles!!!

1 comment:

  1. Yeah..its true that everything has to be done legally.. We have to read and understand the details of the policy very well so that we don't miss out any tricky clause which the insurance people might prefer to let remain unnoticed. And when you claim for an insurance, never expect to get a full coverage ever. Getting a decent coverage is itself a big thing, because producing all the documents that they need for justification is not an ant's task. Also, when you switch from one insurance to another, there are many things to be taken care of. For instance, I just read at http://www.unocardealers.com/auto-insurance/switching-auto-insurance.html that some people tend to think that not paying one installment will cancel their insurance. It is, in fact, true. Do not fall for the prejudice, it'll only lead to complications!


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