Types of vehicle insurance

I) Types of vehicle insurance

Generally plans offered by general insurance providers can be broadly classified under two categories:-

a)      Third party liability insurance - This plan usually covers damage to property, accidental death and injury to a third party. This plan is also mandatory requirement for all vehicles plying on public roads in India.

b)      Comprehensive Plan - This usually is a preferred options by many as it covers for both 'own damage' and legal liability of third party. It also covers theft or damage caused by unforeseen perils like cyclone, earthquake, fire explosion etc.

II) Factors that affect the premium for vehicle insurance

The factors affecting premium calculation are based on the risks that insurance company will be underwriting and these can be can be grouped under four categories:

a)      Vehicle related risks - Make, fuel type and cubic capacity etc. are few parameters which will determine the premium. Some vehicles like SUV (sports utility vehicle) and commercial vehicles often need higher premium payouts as insurance firms get large number of claims on such vehicles. Generally diesel vehicles have a 10-15 per cent higher premium than petrol cars. At the time of renewal Insured declared value (IDV): At the time of renewal the age of the vehicles and its depreciation predominantly determine the premium that you will pay. For vehicles less than five years old, based on the years of use depreciation is applied to the ex-showroom price to calculate the IDV. For vehicles that are older than five years the market value of the car is taken as IDV.

b)      Location related risks- This depends on the area of registration. Usually premiums are high if you live in urban area, near highways or densely populated area. If theft is high in the area where you live then the premiums go up.

c)       Claims history related - If claim for your vehicle insurance then premium can go up following year.

d)      Driver related - The age and profession of the driver is taken into account. If there are multiple drivers then the premium goes up


III) Tips to reduce the cost of your vehicle insurance

a)      Voluntary deductibles: Deductibles or excesses are the amounts over and above which a claim is payable by insurance provider. If you are willing to settle petty claims for small damages from your pocket voluntarily, then the cost of premium for vehicle insurance can be reduced approximately by thirty per cent.

b)      No claim bonus
You can reduce the premium payout by nearly fifty per cent every year, if you don't claim insurance on your vehicle. Insurance companies give the benefit of no claim bonus as record of your good driving year after year. If you sell your vehicle, this no-claim bonus can be transferred to your new insurance policy for the new vehicle and avail lower premium payout.

c)       Discount for security features
Few cars come with enhanced security systems which are built-in such as anti-theft alarms and immobilizers. There is low probability of theft of such cars. These cars can be insured for less premium. However, only Automotive Research Association of India (ARAI) approved devices will attract a 2.5 per cent discount on your premium.

IV) Add-ons that increase the premium but are useful

a)      Nil-depreciation insurance
A nil depreciation policy covers for complete claim for rubber and plastic parts. Generally an insurance company will pay only for fifty per cent of value for these parts that are subjected to wear and tear. With most cars having features with plastic and rubber parts it is advisable to go for nil depreciation policy, although the premium would be increased. In case of a claim it can knock a lot off amount in a repair bill.

b)      Personnel cover
A normal comprehensive insurance cover will include personal accident coverage for the owner of the car. For a small fee, additional users who possess a valid driving license and are using the car can also be covered under the insurance policy. By default, most companies include this cover in their comprehensive insurance policies.

V) Key areas where you may go wrong when choosing a cover

a)      Value of the car
In order buy a policy with a lower premium payout, often people reduce the IDV or 'insured declared value' of the car. But in case of an accident the car will be treated as total write off. Avoid such practice as the benefit for the cost is not adequate. Always try and choose a policy that offers you the maximum IDV on your vehicle, even if it means a slightly higher premium.

b)      Lapse of Policy
In case of lapse of policy lapse your insurance provider may give a grace period of usually a week. Post this period you run the risk of driving a car without insurance. You will also stand to lose out on benefits like lower premiums or discounts for vehicle insurance.

ArthaYantra provides personal finance advice online.

Disclaimer: The opinions expressed in this article are the personal views of the author. NDTV Profit is not responsible for the accuracy, completeness, suitability, or validity of any information on this article.

finding the cheapest car insurance in america usa

There are many things to check before choosing a car insurance.  let me describe the whole thing one by one.

How To Choose the Best Car Insurance Company

Setting your priorities, checking reputations and financial standings, comparing quotes—shopping for the best car insurance company for your needs might seem daunting unless you tackle the process one step at a time.

Know What You Want

Understand what coverages and amenities you’re looking for in a car insurance company. Are you solely looking for cheap auto insurance? How might choosing the cheapest option affect your actual coverage? What about customer service—that’s important, too, right?

Know your priorities before you begin looking to buy car insurance. Ideally, you’ll want a company that offers great coverage at an affordable price from customer service-oriented agents.

Check for Reputation and Financial Standing

Once you’ve found a few seemingly compatible car insurance companies, do some investigative work and check out the companies’ reputation and financial standing.

• First, check with your state’s Department of Insurance website and make sure the company is licensed to sell auto insurance in your state.
  • Also, take a look at complaint ratios, if available.
• Then, look at the companies’ financial standing on reputable websites such asJ.D. Power and A.M. Best.
  • Auto insurance is a two-way street: you pay for the coverage and your company provides the coverage. You need to make sure your company can pay your damages when required.
• Finally, find out how the companies stand with the Better Business Bureau (BBB).
  • The BBB ranks companies from A+ to F, and gives you a multitude of information about those companies, such as the length of time they have been in operation and information about customer complaints (including resolutions).

Compare Car Insurance Quotes

Consider these tips when comparing auto insurance quotes:

• First and foremost, never look at just one or two car insurance companies;always get and compare at least three quotes.
• Talk with family members and friends about their car insurance providers.
  • How long have they been with the company?
  • Are they satisfied with their rates?
  • What about customer service? How has the provider handled their premiums in the events of traffic violations, at-fault accidents, and other common premium-increasing situations?
• Look for auto insurance companies that offer discounts and good-driver rewards programs.
  • Some companies provide breaks for drivers of certain ages or for drivers with anti-theft devices.
  • Others offer rewards (e.g. lower premiums) for drivers with consistently good driving records.
• Ask about bundling insurance policies.
  • Also known as “multi-line coverage,” some companies provide discounts for purchasing two or more lines of coverage (such as car insurance and homeowner insurance).
• Check out the companies’ social media accounts.
  • Reach out to your potential insurance companies on platforms such as Facebook and Twitter and evaluate how they respond to your questions about issues such as coverage and discounts.

Remember, comparing car insurance quotes is never just about what’s cheapest.

Periodically Evaluate Your Coverage

Getting great car insurance coverage at an affordable rate is fantastic, but don’t get complacent. Many companies decrease premiums for certain life events, such as:

• Buying a new car. You might get lower rates if you purchase a new vehicle with great safety and anti-theft features.
• Moving. Living in low-crime areas tends to get you lower premiums.
• Getting older. Mature drivers (generally those who are 25 and older) often benefit from lower car insurance rates.
• Getting married. Combining two insurance policies into one can save you money. Married drivers are also viewed as more responsible and often see lower rates.
• Purchasing a new home. Remember multi-line insurance? You could get a discount if you insure your home with the same company.

Of course, some life events can increase your rates—which means you’ll want to talk with your agent about ways to decrease them or even start comparing quotes from other providers. Such situations include:

• Moving. Again, moving can affect your car insurance rates, and in this case moving from a low-crime area to one with a higher crime or accident rate might cost you.
• Filing claims. Each claim you file can increase your rates—especially claims for at-fault accidents. Talk with your agent about ways to decrease rates or avoid rate hikes, or consider shopping for another provider.
• Traffic violations. Similar to filing claims, the more traffic violations and driving points you accumulate, the higher your premium could become.
• Adding a teenager to your policy. Often, increased rates when adding a teenager to your policy are unavoidable; however, if you feel the premium has become too high, talk with your agent about ways to decrease it (such as teen driving courses) or start looking at other companies.

Simply put, whenever you experience a life event that might decrease or increase your rates, it’s time to evaluate your coverage and perhaps even start comparing quotes from other providers.

Consider Working with an Agent or Broker

The difference between car insurance agents and car insurance brokers is that, generally, agents work with one company while brokers work with several companies.

So, while an agent can help you get the best coverage and rates from his or her particular company, a broker can shop around and help you find the best coverage and rates from a number of companies. Keep in mind, however, they may charge you a broker fee.

Unless you feel comfortable shopping around on your own or have your heart set on one company, you might want to consider consulting an agent or broker about your car insurance needs.