Tips for First Time Auto Insurance Buyers

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Thinking of buying your first automobile? Well, then auto insurance might just be the last thing on your mind. But it is important. The Indian Motors Act makes it compulsory for all automobile buyers to get their vehicles insured.

Now as to why buying auto insurance is so important for you. Well, if your vehicle is insured, the auto insurance will come to your help in the case of accidental damages to your vehicle. The insurance company whose auto-insurance policy you have availed will step up to pay for the damages to your vehicle including repair costs.

You’ll be paying the company an annual premium of course to receive the insurance benefit, but it helps in mitigating the expenditure you would have to face if you had an uninsured vehicle.

In short, you pay the company to come to your financial aid whenever your vehicle is involved in an accident, thus lessening your financial burden.

Types of Vehicle Insurance

There are two types of vehicle insurance policies

Third-party liability only policy: A mandatory policy as per the Motor Act of 1988 that has to be taken with the purchase of an automobile.

Comprehensive coverage policy: Coverage against own-damages, total loss of or damages to your vehicle caused by theft, accident, explosion, fire, lightning, self-ignition, strikes, riots, natural calamities or act of terrorism.

Top 20 Tips to First-Time Insurance Buyers

1. Do your Homework

You as a first-time insurance buyer should know all the available details of the insurance policies in the market. Find the right source online to view and compare policies basis of several parameters like low premium cost, coverage, additional benefits, claim settlement ratio, etc. Use the online car insurance calculator to find your policy most easily and quickly to match your requirement to the policy you need.

2. Knowing What’s Best: Claims Settlement

The three vital insurance claim ratios you must understand are:

  • Claim Settlement

    CSR is calculated as below: number of claims settled / number of reported claims + remaining claims at the beginning of the year – remaining claims at the end of year = claim settlement ratio

  • Claims Repudiation

    CRR is calculated as below: Rejected claims / total claims = claims repudiation ratio %

  • Claims Pending

    CPR is calculated as below: Outstanding claims / total claims = claims pending ratio %

    Claims data lets you analyse the insurer’s history for claims and its handling process. Keep in mind that relatively new companies in the market will have a low settlement ratio because claims that early could mean fake.

    Claims data does provide us with vital information and helps in making a final decision when choosing the product or the insurance company. If you are dwindling between two insurers who offer similar benefits, then Claims data may help you seal the deal.

3. What to know about Third-Party Insurance

The term ‘third-party’ means that the primary beneficiary of this policy is neither the insurance company nor the original insured, but a pretentious outside member affected by the actions of the vehicle and thereby the vehicle owner.

  • Third-Party Insurance offers:
    • Legal coverage and total financial assistance
    • Simple, seamless and quick process to acquire
    • Beneficial and lucrative to the policyholder during unforeseen events
  • Standard third-party insurance covers:

Accidental damages caused by your automobile that has resulted in:

  • Death or bodily injury to the third-party
  • Damages to third-party property
  • Accidental death of the vehicle’s driver/owner
  • Total permanent disability suffered by vehicle’s driver/owner
  • Salient features of the third-party insurance:
    • The claim is directly paid to the third-party or his solicitor by the insurer. The policyholder is only a nominal beneficiary in this case.
    • An own-damage cover is not applicable in third-party cover.
    • Insurance premiums under third-party do not differ with the vehicle value as is impossible to know how much the liability is.
    • Third-party liability insurance requires your lawyers’ involvement.
    • Renew or buy third-party insurance online in quick and easy steps.
  • Exclusions in the third-party insurance
    • Accidental loss, damage or liability upheld outside geographical boundaries other than specified.
    • Claims that arise due to contractual liability if individuals other than the owner or specified driver driving the vehicle.
    • Third-party incurred loss or damage due to accidents accrued from substantial loss from elsewhere.
    • Liabilities due to invasion, war or warlike operations, radioactive contamination or nuclear weapons, either directly or indirectly.

4. Understand your Buy

An insurance policy document is a legal contract that may contain technical terms that are hard to comprehend.

A thorough read of the documents before you sign the dotted line is essential if you want to avoid future confusion. Your policy document checklist:

  • Who is covered
  • What is the coverage, its inclusions, exclusions, and limitations
  • When the coverage begins and ends
  • How much coverage in terms of denomination is provided
  • How much you’ll need pay for this coverage (the premium)
  • How to file a claim or report a loss