How to choose the Best Car Insurance Policy

How to choose the Best Car Insurance?

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The need for Car Insurance

Owning a Car in India is not just about convenience and comfort rather it is a status symbol. As a part of a growing economy, having a car is seen as a symbol of progress. Just as with everything else, owning a car comes with its own set of responsibilities and one of them is having car insurance, and its primarily for three reasons. 

  1. To cover the damage you may end up doing to another person, their car, or their property. This is known as third-party coverage because it provides coverage to others.
  2. Through medical payments, comprehensive, and collision coverage, auto insurance protects you, your passengers, and your vehicle. This is an example of first-party protection.
  3. Insurance assists you in adhering to the law. Automobiles are hazardous, heavy, and expensive machines. Insurance protects drivers, passengers, and others from injury or damage caused by someone who would otherwise be unable to pay for their actions.


How does Car Insurance work in India?

Car insurance is a contract between an insurance company and a car owner in which the car owner agrees to pays premiums and the insurance company agrees to pays for any loss or damage to the vehicle in period of insurance. In India, car insurance is mandatory regardless of whether the vehicle is a commercial or personal. 

If one is unlucky enough not to be involved in a serious enough accident to need to file a claim, one will forfeit the sum paid for protection. On the other side, insurer is eligible for a No Claim Bonus, which ranges from 20% of the premium in the first year all the way to 50% in the sixth year.


Types of Car Insurance in India

There are two types of car insurance.

  1. Third-party liability insurance cover: provides only a modest level of protection. This sort of car insurance only covers payments incurred as a result of your vehicle causing damage to another vehicle, property, or person.
  2. Comprehensive insurance cover: covers damage to the vehicle, death of the driver or passengers, and damage to a third-party vehicle, property, or person caused by the vehicle.

Remember that the former is required by Indian law, but the latter provides more coverage and benefits. Choose third-party automobile insurance if you simply need minimal coverage, such as protection against third-party liability. If you want to protect your car as well, a Comprehensive policy is the way to go.


How is the Insurance amount decided for Car?

The IDV, or Insured Declared Worth of your vehicle, is the maximum insured amount sum the insurer can give you; it nearly equals the market value of your vehicle. When you buy insurance for a new car, the IDV is computed using the price shown in the showroom. Your car’s IDV, on the other hand, is not constant.

Because of the rate of depreciation applied to vehicles between one and two years old, your IDV will fall when you renew your motor insurance after a year.

IDV = (Manufacturers listing price – Depreciation)

Apart from IDV, the following factors also influence the premium amount 

  1. Vehicle-related factors-The make, type of fuel, model, etc, all matter when it comes to determining the insurance for the car premium. Usually, diesel cars attract a higher premium when compared to petrol cars.
  2. Location-The premium usually tends to be higher in urban areas and near highways.

Driver-The age and profession of the driver also plays a role in determining the premium of the car insurance. Multiple drivers lead to higher premiums.

Factors to look for

  1. Customer Service: The level of customer service provided by an insurance business can reveal a lot about the firm. Look for reviews or experiences from previous customers.
  2. Check to see if the insurance offers a claim settlement option via the internet. The online mode can help you save a significant amount of time, effort, and money.
  3. Options for Cashless Garages: Always look for cashless garages in your area. Check the list of network garages to see if your auto insurance plan is covered.
  4. Claim settlement ratio: This is the percentage of total claims settled compared to total claims received. Choose a firm that has a higher claim settlement ratio.
  5. Rider options include zero depreciation, roadside assistance key replacement, engine protection insurance, and other value-added services.


Top 5 Largest Car Insurance Companies in India
Top 5 Largest Car Insurance Companies in India

Top 5 largest Car Insurance companies in India

Car Insurance companiesCashless Garage NetworkIncurred Claim ratios 2019-20(%)
Bajaj Allianz Car insurance4000+88.83
Bharti axa Car insurance5200+87.99
Cholamandalam Car insurance6900+85.89
Digit Car Insurance1400+87
Edelweiss Car Insurance1000+NA


We hope this articles helps you understand How to choose the Best Car Insurance Policy. If you need any assistance on Investments, Insurance or How To Invest In Mutual Funds Feel free to contact Wealth Baba. We will try to help you out in the best possible way.

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