April 13, 2021

Things to Remember While Switching from Third-Party to Comprehensive Car Insurance

Car Insurance

A car insurance policy is mandatory to legally drive a car in India. While the law prescribes third-party policy as the minimum requirement, you have the option to upgrade to a comprehensive policy. Since a third-party cover has limited coverage, it does not include coverage for expenses for the damages to your car. So, it is prudent to purchase a comprehensive policy that offers an overall coverage for own damages as well as third-party liability. This article enlists some handy tips to note when you upgrade from a third-party cover to comprehensive car insurance policy.

Cost of insurance cover

The primary difference that one notices when upgrading from third-party coverage to a comprehensive plan is its price. The reason for such price increase corresponds to the increase in the coverage offered by the policy. A third party car insurance plan offers limited coverage and its premiums are standardised by the regulator, the Insurance Regulatory and Development Authority of India (IRDAI). On the other hand, a comprehensive policy that offers far greater coverage has the freedom to customise their coverage based on the insurance company’s evaluation of risk. Thus, the cost of insurance cover differs among the two types.

Coverage of the policy

The next most important item to consider is the coverage your newly upgraded comprehensive policy offers. A comprehensive policy includes the damages to your car along with natural calamities and man-made events too. Moreover, there are number of other situations that are covered under your comprehensive insurance policy which commonly include like vandalism, thefts, fires, etc. It is essential you know about the coverage when upgrading so you can adequately insure against these kinds of risks.

Insured Declare Value (IDV)

Insured declared value or IDV is the closest estimate of the market value of your car. The premium for your policy is based on a number of factors one of which includes the IDV. If an unfortunate event like theft or damage occurs, the insurance company pays this amount of IDV as compensation to the policyholder. Thus, it is essential your carefully set its value. Moreover, while setting the value, make a note of its impact on your premium and whether the coverage fits within your budget. So, remember to not set a very high amount of IDV as it directly impacts your premium whereas an extreme case of lower value will result in a financial loss in the event of an unfortunate accident.

Deductibles

Deductible is another factor to consider when switching to a comprehensive policy. It is that amount that you need to pay at the time of claim and it directly impacts your premium. There are two types of deductibles, compulsory/standard and voluntary. A compulsory deductible is mandatory for all policies whereas a voluntary deductible can be opted to further reduce your premium.

No-Claim Bonus (NCB)

Lastly, after considering the above factors, do not miss on no-claim bonus. This facility is awarded at car insurance renewal wherein a concession is offered on own-damage premium. This amount will help to reduce your premium thereby keeping the premium at an affordable level.

Keep these above-mentioned tips in mind when switching or upgrading your third-party insurance to a comprehensive cover as they not only help get the right policy, but also within your budget.