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5 Easy Ways to Increase the Cost-Effectiveness of your Car Insurance

5 Easy Ways to Increase the Cost-Effectiveness of your Car Insurance

A car has become an indispensable part of the modern-day lifestyle. It facilitates easy commute, is cost-effective and convenient. In fact, in 2021, even despite the shortage of semi-conductors car sales grew by 27% (Source: TOI) and crossed the 30 lakh units milestone, a feat repeated only three times in history so far!

While the popularity of cars is undeniable, the importance of a car insurance policy should also be noted. Besides the legal mandate, a car insurance policy proves to be a financial saviour in an emergency involving your car. However, when it comes to premiums, car owners look for the lowest possible rates to cut down on their expenses. This, sometimes, leads to skimping on the coverage. What if, instead, you can save premiums without compromising on the coverage?

Yes, there are ways in which you can increase the cost-effectiveness of your car insurance policy. Here are 5 of them –

  1. Pick the right coverage

    There are two types of plans – third party liability policy and comprehensive package policy. The former is mandatory as per the Motor Vehicles Act, 1988 while the latter is optional. Third-party plans have a limited scope of coverage and so, their premiums are very low. Comprehensive plans, on the other hand, provide wider coverage and, thus, have higher premiums. 

    If you have a car up to 5 years of age or if you drive your car frequently, a comprehensive policy would be suitable. On the other hand, if your car is very old or if you use it sparingly, you can opt for third party coverage only and reduce the premium amount.

     

  2. Use the no claim bonus wisely

    For each year that you don’t make a claim in your policy, the insurer rewards you with a no claim bonus. The bonus starts at 20% after the first claim-free year and then goes up to 50% for 5 successive claim-free years. So, if you have earned a no claim bonus, use it to claim a discount on renewal. Moreover, try and avoid making small claims in your policy. This is because a single instance of claim wipes out the entire accumulated no claim bonus making you lose out on the renewal discount. Pay small claims from your pocket to preserve the no claim bonus so that you can make the policy cost-effective.

  3. Look for discounts

    Every comprehensive car insurance plan has a host of discounts that help you reduce the premium. For example, you can claim a discount if you have installed ARAI approved safety devices in your car if you buy the policy online if you are an existing customer, etc. So, lookout for these discounts and claim them to reduce your premium. Moreover, if you are a careful driver and do not experience too many claims, you can opt for a voluntary deductible. Choosing this deductible would give you a considerable discount on your own-damage premium. However, remember that the deductible would mean an added out-of-pocket expense at the time of a claim. So, weigh in the expense and the premium saving when choosing this deductible.

  4. Compare and buy

    More than a dozen insurance companies are offering a car insurance policy for your car. While the policies offer similar coverage features, their premiums vary because of the different pricing policies of different insurers. That is why you should always compare the available car insurance plans before buying. Shop around and pick a policy that offers the best coverage benefits at the most competitive premium rates. Comparing would help you find the best deal for your car insurance plan and when you would buy online, you can claim the online discount and get a reduced premium. A double bonanza, isn’t it?

  5. Renew on time

    Lastly, renewing your car insurance policy on time also helps in premium savings. Since car insurance plans are legally mandatory, you need the coverage to drive the car legally. As such, renewing the policy on time is recommended to enjoy uninterrupted coverage. Moreover, timely renewals would also help in making your policy cost-effective in two ways. One, if the policy would be active, you would be able to get a lower renewal premium rate. Insurers tend to inflate the premium if a lapsed policy is renewed. Two, you would be able to preserve the no claim bonus which lapses if you don’t renew the policy within 90 days of expiry. So, renew the policy on time to save on the premium costs and also to enjoy non-stop coverage. 

The next time you are in the market to buy a new car insurance policy or renew one, keep these tips in mind. Use them to reduce the premium cost and make your policy cost-effective. While the coverage would provide financial security, the reduced premiums would make your pockets happy. A win-win combination!

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