Car Insurance – Why Cheap Coverage is not Always the Best

Car Insurance policy is offered in two variants- third party insurance policy and comprehensive insurance policy. Third party insurance policy is compulsory under Indian Law whereas comprehensive insurance policy is not compulsory. The premiums of third party insurance policy is fixed by Insurance Regulatory and Development Authority of India (IRDA) and are lower than the premiums of comprehensive insurance policy which is fixed by the insurance company considering various factors. The comprehensive insurance policy provides wider coverage and benefits as compared to third party insurance and also the premium of the third party insurance plan is same across all the insurance company whereas the comprehensive car insurance premium varies for different insurance companies as per their coverage and benefits. Third party car insurance is cheaper than comprehensive car insurance policy but offers limited coverage.

Reasons why cheap coverage is not always the best

Individuals consider buying the cheapest policy as the best. The car insurance policy which offers limited coverage and benefits at low premiums is not the best but the one offering the required coverage and benefits at affordable premium is the right choice. The premiums of car insurance policy depend on various factors. You can try and keep the premiums on your car insurance policy low but every time if you opt for low premium car insurance plan to save on money then your coverage might get hampered. Let’s understand how?

Third party insurance or comprehensive insurance

Third party insurance may be a good option for many car owners as the premium rates of third party car insurance policy are cheap and fixed as compared to comprehensive car insurance policy but third party insurance provides coverage only against the damages caused to the third party or third party property but does not cover damages suffered by the insured car and the driver or the owner of the car. The third party car insurance also does not cover theft or loss of the car which would lead to huge financial loss to the holder of the policy at the time of the accident for damages of the car or in the case of theft or loss of the car. The comprehensive Insurance policy provides complete protection to the holder of the policy covering all the damages caused due to an accident and includes loss or theft of the car. Comprehensive insurance policy premium may be higher as compared to third party car insurance premium but are reasonable as compared to the benefits and coverage offered under the comprehensive car insurance policy.

With or without add-on covers

Add-on covers are additional covers which can be added to the comprehensive car insurance policy to enhance its coverage and provide additional benefits on payment of additional amount of premium. Most of the policyholders do not consider buying add-on covers as it increase the premium amount and think they do not require them. Add-on covers provides wider coverage at low additional premiums and secure the insured car by providing various protection such as engine protection add- on the cover which pays for the damages of the engine of the car which can otherwise lead to huge financial drainage, zero depreciation cover which protects the car from deprecation and ensuring higher value, etc. You should opt to buy the required add-on cover and enhance your coverage for your car insurance which will benefit you in various ways later by paying low additional premium now.

Lower premiums through low IDV (Insured Declared Value)

IDV is the market value of the car that is quoted by the insurance company at the time of buying or renewing the car insurance policy which the insurance company will pay on total damage of the insured car or on the theft of the insured car. The IDV value of different insurance company may be different and lower the IDV value of the car, lower will be the amount of premium. The policyholders insured their cars for lower IDV so that the premiums of the car insurance policy will be lower. This may lead to financial loss to the policyholder in the event of total damage or theft of the insured car. Just in order to decrease the premium amount, you should not decrease the insured declared value of the car. Hence just running after getting your premium cheaper for your car insurance plan may not cover the risk fully.

Conclusion

Always try and buy an inclusive coverage which suits your needs and requirements and do not always run after low premiums. If you want to buy a car insurance plan with low premiums then always compare the available car insurance policies offered by various insurance companies. You can also use policy discounts to decrease the amount of premium buy do not compromise on the coverage of the car insurance policy because if you compromise on the coverage of the insurance plan to get a low premium on your car insurance policy you will lose the fitness of claim. There are many options to reduce the premium of the car insurance policy such as using the no-claim bonus, policy discounts, comparing but do not compromise coverage for the sake of low premium.