Those who can afford to own a fleet of cars might not be too worried about spending money on car insurance. However, those who own one or two cars might be comparatively cost-conscious. For people belonging to this category, making an informed decision regarding their vehicle insurance can save a considerable amount of money.
Car insurance is a mandatory policy; you need to buy one if you want to drive your four-wheeler legally in India. Therefore, if you are looking at purchasing and renewing car insurance policies to lower the total amount paid as insurance premium without compromising on the coverage, it is possible. Read ahead to understand how you can manage your car insurance policies effectively in case you own two cars.
Car Insurance Terminology
Before going into the details, here’s a list of important car insurance terms and their explanations. Once you understand these, it will be easy for you to package your car insurance cover.
● Third-party (TP) Liability Policy
The Motor Vehicles Act, 1988 states that all car owners must purchase this policy. It covers damage to third parties in case of a car accident
●Personal Accident (PA) Cover
It features Rs. 15 lakh cover for owner/driver in case of death or permanent/total disability as defined by the Insurance Regulatory and Development Authority of India (IRDAI).
● Own Damage (OD)
Own Damage covers damages to the insured vehicle due to fire, accidents, and calamities. It also offers a cover against theft.
● Add-ons
Add-ons pertain to extra personalized covers such as Roadside Assistance, Zero Depreciation, etc.
● Long-term Policy
If you are buying a new car, you will have to purchase a long-term policy – a minimum three-year TP coverage.
Unbundling PA and OD
As per a recent IRDAI directive, the PA cover has been unbundled. This means you do not have to buy it twice if you own more than one car. Also, buying a standalone Own Damage cover from a different insurer is possible from September 1, 2019, as per the applicable terms and conditions.
Managing Your Car Insurance
Different people might have different reasons for owning two cars. Understanding the car’s utility, risk exposure, and the law, form the building blocks to reaching the goal of availing optimal coverage and saving on insurance premium.
1) Utility
You need to understand the usage of your car and insure it accordingly. The following section can help you in the process.
Here are some reasons why people might opt for a second car without selling the first one.
● Requirement of two cars due to different needs of family members
● Need for an upgrade but low resale value of old car (having minimal use)
● Using one car for in-city travel and another (for example, SUV) for long-distance road trips
● Using cars in different cities, for example – one car in Mumbai another in Pune
● Need for a new car but emotional attachment with the old car lying in the parking lot
It might be okay (not ideal) to opt for just a TP cover for an old car that stays in your garage and go for Comprehensive cover (TP + OD + PA) with relevant Add-ons for the new car, which will be on the road a lot. If both cars are in different cities or locations and are driven regularly, a long-term wide-ranging cover might be a good fit.
Purchasing two fully-loaded car insurance policies comprising of multiple Add-ons won’t be productive if the new car is used sparingly and the old one is being held on for nostalgia or low resale value. Therefore, introspect regarding the utility factor of your cars before purchasing insurance policies.
2) Risk Exposure
A car used for frequent road trips is exposed to more risk of getting damaged than the unused one kept in the parking lot. Thus, car insurance for both these vehicles has to be chosen accordingly.
One also must look at the location where the car is parked/driven. It might need an extensive insurance cover if it is in a flood-prone area or a location that is vulnerable to car thefts. The skills and the ability of the driver need to be taken into consideration as well. For example, the car driven by an experienced person might not need multiple Add-ons whereas the car driven by a rookie might need a lot of insurance cushioning.
3) Law
Purchasing and renewing a car insurance policy is unavoidable if you want to be on the right side of the law as a car owner. Thus, do it promptly. Ensure that you pay for the PA cover only once for car insurance policies owned by you. Also, understand how a long-term plan affects your premium and coverage before making a purchase decision.
Picking the Right Cover
Online car insurance providers offer a lot of information on their websites regarding the features and benefits of their policies. The information is presented in an easy-to-understand manner. Spend some time to research, understand the inclusions and exclusions of car insurance plans, and pick a cover that meets your requirements.
Managing the vehicle insurance policies of your cars effectively can save big bucks in the long run. With rising fuel prices and high-maintenance cost, saving those pennies can come in handy.
Views expressed in this article are the personal opinion of Animesh Das, Head of Product Strategy, ACKO General Insurance.
