Insurance demystified

Why do you need insurance? Why do they write about someone else’s party on the form? We try and explain a few of the basics of car insurance so that the next time you purchase it you’re not as flummoxed.

The Basics

Let’s get one thing out of the way first: you need insurance. It doesn’t matter if you own the hospital you’ll be admitted in after the accident – the Motor Vehicles Act of 1988 states that to ply your vehicle on public roads, you need to have it insured. Therefore, you need insurance to drive your car around. When you purchase your new car, the dealer will add the cost of insurance to your car. It’s a standard rate in India so far, but the amount you can pay can vary in certain situations. 

Terminology

A little terminology: 

‘Premium’ is the sum you pay to the insurance company. It’s an annual amount that you have to pay. 

‘Surveyor’ is the employee of the insurance company who comes around to assess the damage and check if you’re trying to get a little too much back out of the accident repair.  

When you first purchase your insurance, you may get something called a ‘cover note’. This is a statement saying that you’ve paid for your insurance, but it’s just taking a little time for the actual policy document to get to you. The cover note is valid for sixty days, by which time you should have received your policy. The policy is valid for a year, unlike your ‘PUC’ (Pollution Check Certificate) which is valid for six months. 

You can choose from ‘Third-Party Insurance’ which essentially means that you’re not insured, but the person you run into is, and ‘Comprehensive Insurance’ which means that everyone involved in the mishap is covered by your policy. Third party policies don’t insure your own car or self, which is why they’re cheaper to purchase. However, this means that you will have to bear the entire cost of repair yourself. Comprehensive cover will give you money for repairs when you make a claim, but there is procedure to be followed there. 

Help the insurers help you

First, take photographs of the accident.  Not only will this help with the surveyor’s opinion, it will also help you to obtain an FIR at the nearest police station. Along with the photographs it’ll be a good idea to keep the policy and registration handy as they are usually required to lodge the FIR. 

Once you lodge the claim, your mechanic/service centre will draw up a cost estimate of the repairs and you’ll have to send it to the insurance company. A surveyor will then be sent to verify that all the repairs are necessary to get the car back to the condition it was in before the accident – so don’t try sneaking ‘AC repair’ in if you bust a headlamp and bumper. 

The surveyor will approve the repairs he deems right and typically, the insurance company will reimburse you to the tune of up to 80 per cent for metal parts and 50 per cent for plastic parts. 

Can I sweeten the deal?

If you go through an entire year without making a claim, you’re entitled to a ‘No-Claim Bonus’ where the company might just knock off upto 20 per cent of your premium for being a careful driver. If, however, you do make a claim or two, it’s quite within the company’s rights to increase your premium come renewal time, so try and be a good driver. Or at least, don’t make any claims.  

What happens if I’ve purchased a second-hand car?

The insurance that the car comes with, remains valid until the expiry date on the policy, and you don’t need the previous owner to make claims. However, if you want to play it completely safe, you can get the policy transferred to your name as well from the company. At renewal time, you can claim benefits like the NCB unless you’ve got a really bad track record with the company, in which case your premium might deviate from the regular one.

Is there anything else I should be aware of?

If you’ve got a bi-fuel car, then the CNG/LPG kit has to be insured separately at an additional premium. It needs to be an RTO-approved kit if the company is going to insure it. If you’re going to put in an expensive aftermarket fitment or two such as an audio system, make sure you mention it to the insurer so that they can factor it in. This will make your premium increase, but it’s well worth the money.  Also try and renew your policy before it lapses – this makes the company more inclined to give you the NCB. Insurance is a necessary evil, and we hope we’ve helped make it a little less confusing with this article. If you still have any queries, do leave us a comment at the bottom and we’ll get back to you as soon as possible.