Five Tips to Reduce Car Insurance Premium

Car insurance

by Tanushree Jaiswal Last Updated: Feb 27, 2024 - 06:29 pm 187 Views
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Any car insurance or motor insurance has two parts. The first part is called Own Damage (OD) and it’s an optional part. The second part is called Third Party (TP) insurance and this part is compulsory.

Own Damage (OD): The Own Damage (OD) part compensates for any damage that an insured car suffers in an accident. The amount of premium for this part depends on the value of the car and the owner has scope to reduce the premium depending on some conditions.

Third Party (TP) Insurance: The Third Party (TP) part compensates for any expenses incurred or compensation given for bodily injury suffered by a third person (not the owner or occupants of the car) after meeting an accident involving the insured car or in case of death of the third person(s). Without this part of insurance, no car is allowed to ply on roads. TP premium is fixed by the government every year and there is little scope of availing any discount on this part of the premium.

How to Reduce Car Insurance Premium

While Third Party (TP) Insurance is compulsory to drive a car on the road, in case an owner of a car opts to take full coverage, they also get insurance for Own Damage (OD). The major part of full coverage is the OD– especially when a car is relatively new. As a car gets old, its value as well as the amount of premium diminishes. It is only on the OD part, there are scopes of reduction in the premium amount.

1) Opt for Higher Deductible Amount

A deductible is the amount of money that an insured agrees to pay as part of a claim amount, over which the insurance company will pay if the total claim amount exceeds the deductible amount. As a deductible reduces the liability of the insurer, it charges a lesser amount of premium compared to a policy having no deductible. The higher the deductible, the more will be the reduction in the premium amount.

However, while applying for a deductible to avail of a reduction in the amount of insurance premium, the car owner should remember that, in case of an accident resulting in damage to the car, he/she has to shell out the deductible money out of his/her pocket first. The insurer will pitch in only if the total claim amount exceeds the deductible amount.

2) Avoid Small Claims/No Claim Bonus

The most effective way of reducing car insurance premiums is No Claim Bonus (NCB). It is given as a reduction in the premium of the subsequent year of a claim-free year. Moreover, higher reductions are given for higher numbers of claim-free years.

Generally, a 20 per cent reduction is given in the subsequent year’s premium for a claim-free year. NCB increases to 25 per cent on the subsequent year’s premium after two consecutive claim-free years, then to 35 per cent after three consecutive claim-free years, 45 per cent after four consecutive claim-free years, and up to 50 per cent after five or more consecutive claim-free years.

As the amount of NCB after a few claim-free years becomes significantly high, it’s better for a car owner to avoid small claims in order to enjoy high NCB year after year. For a high amount required to repair extensive damage to the car, insurance may always be used.

3) Ensure to Transfer Your NCB

Car owners are free to choose the insurance company from which they want to get the cover for their car. It is not mandatory to renew car insurance from the same insurer year after year.

However, a car owner – enjoying a high NCB following some claim-free years – may hesitate to change the insurance company. As NCB is given as an incentive to responsible driving leading to avoidance of accidents, other insurance companies also want to provide insurance cover to such an insured vehicle enjoying high NCB due to safe driving.

So, while changing the insurer, NCB may also be transferred and a reduction is given in premium based on the existing numbers of consecutive claim-free years. While changing the insurer, the car owner should ensure that the NCB is also transferred and the premium amount is reduced accordingly.

4) Secure Your Car with Anti-theft Devices

Anti-theft devices make cars more secure. As a result, stealing a car fitted with such a device not only becomes difficult, but also becomes easier to track down a stolen vehicle. So, the instances of theft-related claims of such secured vehicles become low and the insurance companies in turn reward the owner of such a car by reducing the premium amount. So, installing anti-theft devices is another way of reducing car insurance premiums.

5) Buy Auto Insurance Online

As buying insurance directly from the websites of insurance companies results in saving distribution charges, many insurance companies pass the benefit to the consumers and give additional discounts on online purchases.

So, while buying or renewing car insurance, a car owner may compare the offline and online insurance premiums and choose the version having a lower amount to reduce the insurance premium. However, in the case of a claim, the insured needs to contact the helpline number of the insurance company in the absence of an intermediary.

Conclusion

Apart from the above ways of reducing car insurance premiums, getting a discount on OD premiums, which insurance companies give on the amount of tabular premium – is also a great way of reducing car insurance premiums. So, before choosing an insurer, a car owner should explore all the options to reduce the premium.

Frequently Asked Questions

Does car insurance premium increase after a claim in India?

The basic premium doesn’t increase but in the absence of a No Claim Bonus and some other discounts, the net premium amount may become higher.  

What is the 15% extra benefit in car insurance?

Some insurance companies provide 15 per cent extra benefits on the insured declared value (IDV) of a car, which may help the owner get a higher compensation at the time of the theft, total damage or even reselling the car.
 

Is it good to claim car insurance?

The purpose of any insurance is to get the claim amount after the occurrence of an insurable event, i.e. accident in the case of car insurance. However, if the damage is minor, it’s better not to claim a small amount as the benefit of NCB will be lost.

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About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.

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