That is why we wait for the sale season, use discount coupons or shop online - all in an effort to bring down our expenses. What about our car insurance premium? Is there a way to bring it down too?
Car Insurance Down Payment Meaning ?
We care about it. That's we've made this step-by-step guide on reducing car insurance premium.
Car Insurance Premium - Saving VS Coverage
Your car insurance premium is always a considerable sum no matter how cheap your car was in terms of its cost. Being a mandatory requirement (the Motor Vehicles Act mandates a car insurance cover), the cost is unavoidable.
Thus, it is with a heavy heart that we part with our money when buying or renewing our car insurance plan.
It is possible to customize the premium amount of your car insurance policy to some extent. The idea is to not miss out on future coverage in the race of reducing premium costs for the present.
Step 1 - Determine the optimal Insured Declared Value (IDV) of your car.
The IDV of your car is in effect the maximum Sum Assured of your car insurance plan. It is the amount (calculated as the car's market price minus the depreciation) which is payable to you if your car is stolen or your car is damaged beyond repairs.
As is obvious, the premium rate is determined on the quoted IDV. The IDV varies across insurers and so does the premium rate. The option to select the IDV is solely on you. This chosen IDV should be optimal. Too high and you unnecessarily pay a higher premium, too low and you get a small claim. A balance must be reached and an optimal level of IDV should be selected.
For selecting the optimal IDV, you can deduct the depreciation rates standardized by IRDA from the car's market price.
Vehicle's age Rate of depreciation
Less than 6 months 5%
6 months to 1 year 15%
1-2 years 20%
2-3 years 30%
3-4 years 40%
4-5 years 50%
Assess your IDV as per your car's age and settle on the optimal level.
Step 2 - Consider the coverage available.
Once you have identified the IDV, look at the coverage provided by various plans. Usually a comprehensive policy has two coverage parts - third party cover and own damage cover. Also, there might be riders available which allow you to customize your plan and enhance the coverage. Special consideration should be given to such riders as adding them would increase the premium incidence.
Riders should be chosen based on your requirements. For instance, a zero depreciation cover works wonders for newer cars while an engine protect rider is helpful if monsoons causes water-logging problems in your locality and endangers your car's engine. Cut down the frills but opt for riders which pertain to your requirement and you can substantially lower the premium.
Step 3 - Assess the optimal premium based on the cover.
The premium for a third party cover is fixed by the IRDA. It is the own damage premium which varies across insurers and is fixed on the IDV of the car. Riders too increase the premium. So, compare the different premium quotes on two parameters - the computed IDV and any additional rider benefits.
Step 4 - Utilize policy discounts and accumulated No Claim Bonus (NCB).
If you are transferring your insurance plan to a new car or renewing your car insurance plan, you can reduce your premium if you have any accumulated NCB in your previous policy. NCB is allowed if the policyholder does not make any claims in the last year. This NCB lowers the premium.
For those who are buying a new car insurance plan, there might be discounts in a policy which should be explored for reducing the premium.
Step 5 - Portability
Blindly sticking to one insurance policy when other plans are offering a lower premium for the same level of coverage is foolish. You should constantly review your car insurance plan on each renewal and if a cheaper substitute is found you should port your policy and enjoy lower premiums.
Following these steps would definitely result in a much lower premium than you were originally charged. This little nugget of wisdom is, therefore, sure to make your pockets and consequently you happy.
This Guide would help you reducing Car Insurance Premium, Optimally!.jpg)
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