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Car Insurance: Cut The Costs

By Jay Sampat | 5/23/2011 3:56 PM Monday

Car insurance costs are on their way up with the Insurance Regulatory and Development Authority’s (IRDA) decision to revise third-party insurance premium rates, the new structure being applicable to all new policies on or after April 25, 2010. This move will lead to third-party insurance premium rates for private vehicles and two-wheelers going up by up to 10 per cent. What’s more, the insurance regulator has also stated that henceforth the premiums are to be reviewed and adjusted annually based on a formula that has been arrived at. Insurers will however have to honour the existing annual contracts in their current form till they expire.

Hence, if you have bought a new policy or renewed the existing one say in November 2010, you will not have to pay additional premium till your policy comes up for renewal. Third-party liability cover is mandatory. One needs to buy the cover and there’s little you can do to reduce the premium, given the regulated charge structure. Moreover, if you are buying a comprehensive motor insurance policy, there are other customary parameters that come into play. These include age of the vehicle, price, engine capacity and the geographical zone, on which you have limited control.

However, there are several other measures you can take to make sure that your total car insurance bill stays low. Some of the key ones in this direction are:

Maximise No-Claim Bonus: No-claim bonus (NCB) refers to the discount policy-holders are entitled to on renewal of the policy, if they have not made claims in the previous policy year. Even if you have incurred expenses on your car, if the claim amount is lower than the NCB that you are likely to get in the subsequent year, it may make sense to forgo such claims. Also, remember that the NCB is not tied to the car or the insurance policy, but the policy-holder. New car buyers who are buying their second vehicle can transfer their NCB earned on old vehicle to new vehicle if they have sold the old vehicle. This can significantly reduce their new car policy’s premium. Similarly, you can avail of the NCB even if you switch to another insurer.

Insure On Resale Value: Many prefer to opt for a cover equal to their car’s cost of purchase rather than its current market price (resale value) even at the time of renewal. Ideally, the renewal should be done at the resale value.

Mandatory Cover: Claims under third-party insurance can take two forms — death or bodily injury caused to someone other than the policy-holder and damage to property of such ‘third’ parties (the insured and the insurance company being the two parties to the insurance contract). In case of cover against damage to property, the cover mandated by law is Rs 6,000. Beyond this limit too you can buy insurance to cover damage to third-party property but at an additional cost.

 

Find More Articles on: DSIJ Magazine, Insurance, General Insurance, Insurance, Personal Finance, Auto Insurance

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