How to get low-cost auto insurance to suit your finances?

Auto insurance is a legal requirement in India to drive any type of vehicle on the road. Insurance companies do not consider income in calculating the cost of your insurance. But if you are looking for affordable auto insurance that suits your finances, there are other ways to reduce the cost of your insurance.

Top 10 Ways to minimize premium for your auto insurance

There are no specific income-based car insurance policies in India, but if you are considering insurance for low-income families, then you need to opt for a cheap auto insurance plan with a low premium. That would be best suited for your budget. Check the list of 10 simple ways to minimize premium for your auto insurance as mentioned below:-

• Purchase a low cost or a pre-used vehicle
• Increase Voluntary deductible
• Avoid Small Claims
• Transfer NCB from your previous policy
• Purchase Insurance Online
• AAI/WIAA Membership
• Install Safety Devices
• Timely Renewal
• Avoid unnecessary coverage and add-ons
• Never withhold information from your insurer

1. Purchase a low cost or a pre-used vehicle

If you are buying a low-cost or a pre-used vehicle, it will automatically reduce your premium because of lower IDV. India has a diverse market of good vehicles available at a budget price. Whether you are looking for a two-wheeler or a four-wheeler, there are plenty of choices available.

2. Increase Voluntary deductible

Voluntary deductible is the part of the claim you choose to pay for repairs. You decide this amount at the time of purchase or renewal of the policy. If you increase this amount your premium will be reduced.

3. Avoid Small Claims

If you avoid making small claims, you can accumulate your non-claim bonus (NCB). It can fetch you a discount of up to 50% on your premium. Now how will you decide which claims to avoid? Well, it is very simple, if the value of the claim is lower than your NCB value, avoid it.

4. Transfer NCB from your previous policy

If you are going to buy a car after selling your old car, transfer your NCB from the previous policy to the new policy. You can even reserve your NCB from your old car policy for 3 years if you don’t buy a new car immediately.

5. Purchase Insurance Online

Purchasing insurance online is faster, much more convenient, and cheaper as you are not paying any commission. You can compare many plans and quotes from different companies and choose low-cost car insurance to match your requirements.

6. AAI/WIAA Membership

Automobile Association of India and Western India Automobile Association are the bodies empowered by the Motor Vehicle Act. Getting membership of any of these can get you a discount on the premium. Members of these associations are considered to be safe drivers therefore they are given this discount.

7. Install Safety Devices

Insurance companies give a discount of 5% if you install anti-theft devices in your car. When you take measures to safeguard your vehicle you get discounts.

8. Timely Renewal

Always renew your policy on time before it lapses or you may end up paying a higher premium for a new policy. You may also lose your NCB.

9. Avoid unnecessary coverage and add-ons

If you are buying an old car, third-party liability insurance is enough, no need to purchase a comprehensive plan. You can also save money by avoiding riders if they are not of much use to you. Add-ons come with an additional premium and might increase the premium of your insurance’s low cost.

10. Never withhold information from your insurer

Hiding information from your insurer may go against you. So declare your details correctly while applying for a policy.

How to select the best auto insurance company in India?

To shortlist an auto insurance company from so many options is a very difficult task. There are many government car insurance companies, private and public auto insurance companies, to select one there are many factors that you need to consider. 

• Company’s Authenticity
• Financial Stability
• Claim Ratios
• Claim Turn-Around-Time (TAT)
• Network of Garages

Company’s Authenticity

The authenticity of an insurance company is the most important factor. It should be registered with the Insurance Regulatory and Development Authority of India (IRDAI) having a valid IRDAI license. Check the company’s name in IRDAI’s list of registered companies. Also, check the license number of the company. An authentic company can only offer genuine products.

Note: All the government public auto insurance and non-government companies are regulated by the IRDAI.

Financial Stability

A financially stable company can only settle claims on time. Check its solvency ratio, and financial records to assess its performance.  All the financial details of the company are easily available on the company’s website. 

Claim Ratios

Claim ratios are of two types; Claim Settlement Ratio (CSR) measures the percentage of claims settled by the insurance company. A high ratio indicates higher claims. CSR of  90% is usually recommended.

Incurred Claims Ratio (ICR) of the company is another important ratio and indicates the percentage of premiums used by the company in settling its claims. It is the number of claims settled against the number of premiums collected. An ICR of more than 100% means that the company is paying more in claims than it is earning as premiums. This shows the company is making a loss.

A very low ICR below 40% shows that the company is making more profits and might have higher premiums. An ideal range for ICR is between 50% to 90% which indicates that the company is profitable and that it is not charging higher premiums.

Claim Turn-Around-Time (TAT)

The claim TAT is also an important factor in choosing the best car insurance company. Companies that settle their claims in the minimum time are the best. So, check the company’s claim TAT and choose the company with the fastest claim settlement.

Network of Garages

It is very important to check the company’s network of cashless garages which can provide cashless repairs. The wider the network of garages the easier it to get cashless settlements of your car insurance claims.

In India, we don’t have the concept of income-based insurance, but If you keep these factors in mind, you can easily find the best car insurance for low-income families. Always read the policy document carefully yourself to understand the nuances of the policy and make an informed decision.