What is the New Car Insurance Policy and Its 5 Golden Stages?

• Need for a Car Insurance
• The 5 Phases of Buying a New Car Insurance Policy
• What are the Types of Car Insurance Policies Available?
• Third-party liability coverage
• Comprehensive coverage
• Standalone own damage coverage
• How Do You Know What Plan Works for You?
• What are the Add-ons I Must Look For?
• What is the IDV of a new car?
• How do I Make the Policy Purchase?
• Wrapping Up

Need for a Car Insurance

No matter how good you are, driving a car or any vehicle on Indian roads without a valid insurance policy is illegal. Every car owner must get a car insurance policy, whether a new or second-hand car.

This is mainly because of the coverage and financial stability the policy brings in case of a collision or accident – for both the vehicle and the driver/passenger. Also, not all accidents are caused while driving the car. There have been instances of a tree branch falling on a parked car! In such unfortunate situations, a valid car insurance policy comes in handy. An insurance policy also works if your car gets vandalized or stolen! Getting a car insurance policy is necessary for better financial balance.

Did you know that under the Motor Vehicle Act of 1988, every vehicle in India must have at least third-party insurance? Non-adherence to the mandate can result in a penalty.

The 5 Phases of Buying a New Car Insurance Policy

The process of availing of a car insurance policy begins with understanding your needs and the different available policies. Here are the essential things you must consider while getting new car insurance.

1.What are the Types of Car Insurance Policies Available?

Third-party liability coverage

In India, getting a policy with third-party liability coverage is mandatory to protect the third party's rights. The coverage financially safeguards you monetarily in case your vehicle accidentally causes a collision. In this type of policy, your insurance provider will compensate the third party in case of any property damage, death, injury, or disability caused to the third party.

Comprehensive coverage

Comprehensive coverage in a car insurance policy covers third-party liability with any damage to your vehicle. The policy also covers any damage caused naturally, not by an accident or theft.

Standalone own damage coverage

This means you can get a third-party policy cover from one insurer and a policy from another for your vehicle's damages. However, you must first avail yourself of third-party coverage and get one for your car.

2.How Do You Know What Plan Works for You?

Once you understand the kinds of policies you can avail of, you must understand your requirements and how the insurance will financially ease your journey of owning and driving a car. Many factors determine the insurance price for the new car, as simple as its make and model. Likewise, there are many insurance policies with their limitations and strengths. It would help if you compared different policies based on factors like a network of cashless garages that the policy covers, the premium, brand reputation, and claim settlement ratio. You must also realize that the insurance price for the car is not the same across different insurers, even if most of the factors remain the same.

Please note that sometimes, you will want to revisit question #1 based on the plans you come across. For example, suppose some car insurance provider is issuing a comprehensive car insurance policy for a relatively inexpensive premium. In that case, you may revisit only getting third-party liability coverage.

3.What are the Add-ons I Must Look For?

Are add-ons available along with your car insurance so you don't have to worry about financial stresses while owning a car? Some of the known add-ons offered by popular car insurance providers are as follows:

• Zero-Depreciation cover
• Engine Protection
• EMI Cover
• Personal Belongings Cover
• Roadside Assistance Cover
• Consumables Cover
• Licence Loss Cover
• Lock and Key Cover
• Registration Certificate Cover
• Tyre Cover
• Lifetime Road Tax Cover

You can understand more about the add-ons by consulting your chosen policy provider and analyzing whether your car is eligible.

4.What is the IDV of a new car?

IDV is Insured Declared Value – the amount your insurance provider will pay you when your car gets stolen or damaged beyond repair. When buying a new vehicle, getting an IDV close to your car's market value is best. For instance, if a new sedan costs INR 10,00,000, setting the IDV close to that value will benefit you. Technically, the IDV depreciation for a car that is six months old is 5%. Also, the higher the IDV, the higher the premium you will need to pay. Therefore, research and understand the policy and your needs well before choosing.

5.How do I Make the Policy Purchase?

This is the last stage of availing a car insurance policy. So far, you have analyzed what policy fits you best, which provider you opt for, what add-ons you require, and what the IDV is. The next stage is to make the payment for the policy and make the same available. The easiest way to do this is to make the policy available online. You need to provide information like the make and model of your car, engine number, chassis number, details of the RTO the vehicle is registered at, and so on. Once the online verification is done, you can pay through net banking or the latest UPI payments!

Wrapping Up

Understanding the insurance policy and the need for one is crucial when considering buying and driving a car. Not having a valid insurance policy for your vehicle is a punishable offence in India. It is not only safe for yourself to have one but for others around you as well. Think and understand the criticality of this document and how it can aid you in owning and driving a car in an Indian city.