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Car Insurance Premium Chopped With Six Easy Tricks

Are you paying an "unreasonably" high premium every year on insuring your vehicle?

Would you be interested in "drastically" slashing this premium burden... forever?

If yes, you have come to the right place.

Listed below are six extremely simple steps, which will significantly bring down the annual premium bill on your vehicle insurance.

But before that an important point:

When your vehicle is involved in an accident, it can cause damage
a) To you and your vehicle, and / or
b) To third party and their property

Any damage to your vehicle is insured under the Own Damage Cover.

Whereas, injury or death of the third person or damage to his property, is insured under the Third Party Cover (this, by the way, includes personal accident cover for you).

A policy that insures both is known as Comprehensive Cover.

For your information, as per law 
A. Insuring your car for Own Damage Cover is totally optional. But, the Third Party Cover is mandatory.

B. Premium for Own Damage Cover is as per the discretion of the insurance company. But, premium for Third Party Cover is fixed by the IRDAI (Insurance Regulatory and Development Authority of India).

Hence, when it comes to cutting down the insurance expense, you have only the Own Damage Cover premium to target.

1. No-Claim Bonus belongs to the driver
If you make no claims during the year, insurance companies offer a discount on the next year's premium. This is known as No-Claim Bonus. Further, this No-Claim Bonus is cumulative in nature. 

In other words, you start with 20% discount after the first claim-free year. And, with each consecutive claim-free year, this No-Claim Bonus keeps adding up... going up to a maximum of 50% after 5 claim-free years.

Now the important point:

This No-Claim Bonus belongs to the driver and not to the vehicle.

Therefore, when you sell your old car, you are allowed to transfer the discount you are enjoying as No-Claim Bonus on the same, to the new car. And this works, even if you are changing the insurance company. Based on the certificate issued by your earlier insurer, the new insurer will have to offer the same discount.

Note: The No-Claim Bonus certificate issued by the old insurer is valid for three years. So, you don't have to buy the new vehicle immediately for carrying forward the discount to the new car. You are eligible for the No-Claim Bonus on the new vehicle purchased in the next three years.

Psst: What if don't want to sell the old car and keep both the cars? There is surely a jugaad for this!

2. Don't rush to your insurer for every repair
As seen above, by keeping your insurance policy claim free, you can earn huge discount on the insurance premium.

Say the Own Damage part of the insurance premium on your car is Rs.10,000 and you are eligible for a 35% discount after three consecutive claim-free years. This works out to a discount of Rs.3500. Further, it can go up to Rs.4500 (45%) and Rs.5000 (50%), if you make no claims in the next two years.

Given this background, suppose your car meets with an accident and the repair bill adds up to Rs.5000.

Now, it makes sense to take care of the cost yourself, instead of lodging a claim with your insurance company. You can save much more than Rs.5000, by keeping your car claim free. Remember, repair is a one-time event; whereas discount is available year after year.

In other words, pay for the minor damages out of your own pocket. This will be more pocket-friendly than rushing to your insurer every time your vehicle suffers a damage.

Don't let exorbitant car insurance premium damage your pocket.

3. Higher the deductible, lower the premium
Deductible is the part of the claim amount that you will bear, beyond which it is the insurer's liability.

Normally, a policy will have a deductible of Rs.1000. So, you pay the first Rs.1000 of any repair bill and the insurance company pays the rest.

You have the option to fix a higher deductible:

Suppose you are a very safe driver or have a 2nd car that you don't drive very often. This means that the probability of an accident and the consequent damage is quite low. If that be so, you can take the risk of having a higher deductible. Say you fix the deductible at Rs.3500. In other words, you will bear the loss up to first Rs.3500 and only the additional costs will have to be borne by the insurance company.

Since the insurance company's liability is reduced with higher deductible, the advantage is passed on to you... by way of lower premiums.

The annual savings in the premiums, would probably be more than the extra Rs.2500 you have agreed to bear in case of any loss. A simple and effective trick to reduce your premium burden!

4. Use competition to your advantage
As mentioned earlier, insurance companies are allowed to fix their own premium rates for Own Damage Cover. And the market is full of insurers, both private and public.

Therefore, it is but obvious, that you should approach as many insurers as possible and obtain their premium quotes. This will help you to opt for the most economical policy.

In fact, nowadays you can do the comparison online. There are quite a few web aggregators, with whose help you can identify the policy with lowest premium rates.

5. Some Add-on Covers merely add to the costs
You can customize the plain vanilla cover with different types of additional benefits or add-on covers. Of course, these extra covers can be bought only by paying extra premium.

Some of the common add-on covers include zero depreciation, no-claim bonus protection, accidental hospitalization, personal accident cover for unnamned co-passengers, ambulance charges, engine and gearbox cover etc. 

Beware! Not all the add-on covers may be beneficial to you. 

Hence, don't blindly opt for the add-ons. You must assess the cost-benefit impact of each add-on cover, before adding the same to your basic cover. 

6. Bonus Tips
In addition to the above, here are some more tips that can help you slash your car insurance premium.
  • Protect your car from being an easy steal. Install anti-theft and other safety devices. This, of course, will cost some money. So the pay-off would probably be better for the luxury cars.
  • Members of recognized automobile associations are offered discounts by the insurance companies.
  • Car owners in certain professions such as doctors, teachers, Govt employees, etc. too may be offered discounts by the insurance companies.
  • Some insurance companies also offer "loyalty discount" if you buy all, or most of, your policies from them.
  • Needless to mention, policies have to be renewed by the due date. Any delay and you could lose many benefits available under the policy, including the No-Claim Bonus.

Before I conclude, here's an interesting side note on the No-Claim Bonus:
Are you one of the lucky employees driving a company leased car, which you can buyback from the company at the end of the lease period?

Good news! You can transfer the No-Claim Bonus to yourself along with the transfer of the vehicle.

Here's the relevant clause in the Indian Motor Tariff: 
GR 27(e): "The percentage of NCB earned on a vehicle owned by an institution during the period when it was allotted to and exclusively operated by an employee should be passed on to the employee if the ownership of the vehicle is transferred in the name of the employee. This will however require submission of a suitable letter from the employer confirming that prior to transfer of ownership of the vehicle to the employee, it was allotted to and exclusively operated by the employee during the period in which the NCB was earned."

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