Don’t drive away with a raw deal

Buying insurance policies online cost half the amount and offer a wider choice

Have you ever wondered what the on-road price — what you pay the dealer to drive away with your brand new wheels — includes? Well, aside from registration fees, and road tax, there is the component of insurance. Since third-party liability cover is mandatory in India, you cannot take your car out of the showroom without it. Hence, dealers, when quoting the on-road price to you, build-in the cost of the insurance. Sure it’s convenient, but is it priced right?

Discussions with various Hyundai and Maruti dealers in Chennai reveal that the insurance cost is double or more when offered by the dealer vis-à-vis buying it online at various portals. This is particularly true for high-end vehicles where the insurance premium is a hefty amount.

The new Creta 2018 petrol variant E+ model, for instance, is available for an on-road price of ₹11.49 lakh. This includes an insurance premium of ₹44,000 for the first year. Did you know that you can get a similar cover for your new Creta, online, for just half the price? That’s a savings of ₹20,000 right away on the price of your vehicle! Maruti Ciaz S with an on-road price of ₹11.52 lakh includes a bumper to bumper cover insurance that costs ₹27,000-30,000 at the dealer end. It is available at just ₹12,000 online.

Shopping online for policies, can thus save you a tidy sum.

But how do you compare various policies? We look at what’s on offer and guide you on key factors while making comparisons.

What to compare

Besides third-party liability insurance, there are two other broad types of insurance. Collision insurance covers damage to your own car caused by collision. But what if something happens to your car, not necessarily in an accident, or the car is stolen? This is why a comprehensive cover — that includes damage to a car, theft, third-party liability and personal accident cover — is a must. Hence, while shopping for policies online, start by comparing premiums for a comprehensive coverage.

Next, to ensure an apples to apples comparison, you need to decide on the insured declared value (IDV).

This is essentially the maximum amount the car insurance company will pay you in the event of a total loss claim. The insurance premium, in turn, depends on the IDV. Hence, while some policies may appear far cheaper, it may solely be due to lower IDV. Remember, understating your IDV can leave you with inadequate cover.

In effect, the IDV is the current market value of the vehicle minus the depreciation on its parts. But what about a new car?

Here, the IDV is usually calculated based on the manufacturer's listed ex-showroom price minus 5 per cent depreciation.

What’s on offer?

Based on information provided by policybazaar.com, Royal Sundaram offers the best deal. For a comprehensive cover for a new Creta 2018 E+ (petrol) model, premium works out to about ₹17,140 (including GST) for an IDV of ₹9.5 lakh. Other players such as HDFC ERGO, National Insurance, United India Insurance offer a similar cover for about Rs 24,000. Hence, for the same IDV you essentially get an insurance for half the price than what is offered by your dealer.

“Buying new insurance from the dealer may not be ideal as cheaper options might be available online as well. Also, a dealer generally suggests insurance companies with whom it has affiliation, “ says Balachander Sekhar, co-founder and CEO, RenewBuy.com

Important frills

A zero-depreciation or bumper to bumper add-on cover gives you comprehensive coverage without factoring in depreciation. While this add-on could cost you extra premium, for a new car, it is essential.

Balachander adds that the return to invoice feature — that gives you the complete invoice value, if the vehicle is damaged beyond repair — is advisable for a new car.

Even if one adds the zero-dep and return to invoice feature, the premium on your new Creta can at best go upto ₹25,000-31,000. Still a lot cheaper than the steep ₹44,000 your dealer offers.

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