Buying a car is one of the most important decisions that we make. We take months to decide the best brand, the right model and the perfect color while choosing a car. However, while choosing insurance for the car, we tend to blindly trust the agent or opting for the insurance with the lowest premium, instead of researching the best cover for the car. This means that you end up with insufficient coverage for your car during an accident. In this article, we list some of the key car insurance mistakes that people make while buying a policy.
4 Common Car Insurance Mistakes
- Choosing a Policy with Lowest Premium and Higher Premium
While shopping for car insurance, there are many people who focus solely on premiums. While it might feel great to save a few extra bucks while choosing the car insurance policy with the lowest premium, the cover might not be adequate for you at the time of claims. Do not choose a plan just because it is cheap. Understand the coverage, and select a plan that is optimum for your needs as well as your budget.
Deductible is the amount that the policyholder must pay at the time of claims. There are many policies which choosing a higher deductible might reduce the premium. However, at the time of claims you would have to pay more out of your pocket.
- Not Getting Enough Coverage
In India, it is mandatory to buy car insurance. However, just getting the minimum coverage to save money can haunt you at the time of claims. It is best to thoroughly assess your needs before buying the car insurance policy. As per the Motor Vehicles Act, 1988 it is mandatory for every owner of a vehicle plying on public roads, to take an insurance policy, to cover the amount, which the owner becomes legally liable to pay as damages to third parties as a result of accidental death, bodily injury or damage to property. A Certificate of Insurance must be carried in the vehicle as a proof of such insurance.
- Not Shopping Around
There is no one-size-fits-all car insurance policy and similarly not all insurance companies may be equal. Some may offer good service while others may offer a lower premium. It is important to explore your options and choose the best insurance. Read the fine print and make a note of the out-of-pocket expenses that will cost you more at the time of the claims.
- Avoiding Add-on Covers
Add-on covers with your car insurance offer enhanced protection for the car. For example, a zero depreciation add-on cover makes sure that one receives a full claim on the value of parts that are replaced after an accident. Avoiding these add-on covers can cost you a lot at the time of claims.
In the effort to save a few bucks, don’t just choose any cover with the bare minimum of coverage. Instead take the time to find one that suits you the best.
What is Zero Depreciation Shield?
Depreciation is the decrease in the value of an asset due to continuous use. In car insurance, it is the rate at which the value of the vehicle parts depreciates as the vehicle ages. During claims, an insurance company applies the depreciation rate to arrive at the amount payable for the damaged part. The difference between the depreciated part and the market cost of the new part has to be paid by the insured. One way to protect against this is by opting for a zero depreciation or ‘zero dep’ policy.
A zero depreciation policy is not covered under a normal insurance policy.
The Depreciation Rates
Some parts of the car depreciate faster than the others. Accordingly, the insurer applies various depreciation rates for each car part.
– A 50% depreciation rate is applied for parts which have high wear and tear such as rubber/plastic parts, tyres/tubes, battery etc.
– There is 30% depreciation on fiber glass parts.
– Metallic parts, are depreciated at 0-50% depending on the age of the vehicle (from 0% upto 6 months and going upto 50% after 10 years)
– Painting results in a 50% depreciation of the material cost
Zero Depreciation Cover: Things That You Need to Know
In most of the cases the coverage is not 100%. Normal wear and tear and mechanical breakdown is not covered under the zero depreciation policy. There is also mandatory policy excess that a customer has to pay even if he takes a zero depreciation cover. For example, a private vehicle which is 1500cc would attract a mandatory excess of Rs. 2000.
There is also a flat excess that a customer has to pay. For example, for Bajaj Allianz Drive Assure, the compulsory policy excess is Rs. 5000 and the rest is payable by the insurance company.
Only Admissible Claims are Payable
If a claim is not admissible, even partially, then it is not payable. For example: If for a car only one door is covered and the second door is not covered, then during claims, only the claim for one door is admissible. Uninsured items like accessories and bi-fuel/gas kit and tyres are also not covered.
Restriction on Number of Claims
A zero depreciation cover may also limit the number of claims that you can make annually. For example, certain insurance companies may restrict the number of claims to only two for each policy period.
Does Not Include Engine Protector
Engine Protector protects the vehicle from losses caused by damages
This could be caused due to hydrostatic lock that is when engine gets seized due to water ingression or stalling of the engine due to engine oil leakage, or due to consequential losses caused by leakage of lubricating oil or damage to the gear box. A normal zero dep cover will not cover this. However, with Bajaj Allianz Drive Assure Economy, you can get engine protector as well.
Available Only for New Cars
The zero depreciation rider applies only to new cars, with the age limit being five years. If your vehicle is older, it is not eligible for this benefit.
For more information/policy renewal
H Malsawmzela (MSA)