Upgrading Car Insurance: Comprehensive Coverage Benefits

In India, it is mandatory to have car insurance to drive a vehicle. While third-party insurance is the most basic and compulsory insurance plan, it does not cover damage to the insured car. Comprehensive insurance, on the other hand, covers both third-party liability and own-damage coverage. This means that it covers damage to the insured car as well as damage to third parties. If you want to change your third-party insurance to comprehensive insurance, you can do so by following a few simple steps. First, visit an online portal of a car insurance provider and navigate to the car insurance page. Then, enter your car details and choose a comprehensive car insurance policy. You will also need to set the insured declared value of your car and buy any additional coverages you may require. Finally, read the terms and conditions of the policy carefully before completing the payment.

Understand the difference between third-party and comprehensive insurance

Third-party insurance and comprehensive insurance are the two most popular motor insurance policies in India. It is important to know the difference between the two types of car insurance policies to make an informed purchase decision based on your requirements.

Third-party insurance

Third-party insurance is a mandatory and basic insurance plan for your car. It covers damages caused to a third party or their property due to an accident involving the insured car. It does not cover any costs associated with damages to the policyholder's car. The premium for third-party insurance is fixed by the Insurance Regulatory and Development Authority of India (IRDAI) based on the car engine's cubic capacity.

Comprehensive insurance

Comprehensive insurance is an optional insurance plan that provides third-party liability and own-damage coverage. This insurance plan provides financial protection against third-party life/property damages and vehicle damages due to accidents, natural disasters, theft, etc. The premium of such insurance policies depends on the Insured Declared Value (IDV) and other factors like the make and model of the vehicle, etc.

Key differences between third-party and comprehensive insurance

The main difference between third-party and comprehensive insurance is the type of coverage offered. While third-party insurance only protects you against third-party damage and losses, comprehensive insurance covers both your own damage and third-party liabilities. Comprehensive insurance also allows you to choose additional covers to enhance your car insurance policy.

Benefits of comprehensive insurance

• Covers your car's damages
• Protects your pocket from third-party liabilities
• You can customise your IDV
• Opt for add-ons for better coverage
• Protects your car during natural disasters
• Compensates you in case of car theft
• You can opt for breakdown assistance
• Avoid depreciation with zero depreciation cover

Benefits of third-party insurance

• Covers third-party liabilities
• Helps you drive legally on Indian roads
• Protects your pocket from traffic fines

Compare plans with different insurance providers

When comparing plans with different insurance providers, it is important to consider several factors to ensure you get the best deal and the right coverage for your needs. Here are some key points to keep in mind:

• Cost of the policy: Third-party insurance offers limited coverage and is typically more affordable. Comprehensive insurance, on the other hand, provides broader coverage, including own damage and third-party liabilities, and thus tends to be more expensive. Compare the prices of different plans to find one that fits your budget.
• Coverage: Understand the scope of coverage offered by each plan. Third-party insurance covers liabilities related to third parties involved in an accident with the insured car, including property damage, injuries, and legal liabilities. Comprehensive insurance, in addition to third-party coverage, also includes protection for damage to your own vehicle due to factors like vandalism, natural calamities, fire, riots, and theft.
• Insured Declared Value (IDV): IDV refers to the approximate current market value of your car. It determines the price of your insurance policy and the maximum amount your insurer will pay in case of theft or total loss of your vehicle. Compare the IDV offered by different providers to ensure it accurately reflects the value of your car.
• Deductibles: Understand the deductibles, or the values you need to bear at the time of a claim. There are usually two types of deductibles: voluntary and compulsory. Voluntary deductibles are optional and can help lower your insurance cost, while compulsory deductibles are mandatory and tend to be negligible amounts.
• Add-ons and benefits: Different insurance providers may offer various add-ons and benefits, such as engine protection cover, zero depreciation cover, or no-claim bonus protection. Evaluate these additional features to ensure they meet your specific needs and preferences.
• Network of providers: Consider the network of doctors, hospitals, and healthcare providers included in each insurance plan's network. Preferred Provider Organization (PPO) plans tend to have a wider selection of providers but may be more expensive. Health Maintenance Organization (HMO) plans usually have lower out-of-pocket expenses but offer less flexibility in choosing providers. Compare the networks to ensure your preferred doctors and medical facilities are included.
• Metal categories: Health insurance plans are often categorized into tiers or "metal" categories, such as Bronze, Silver, Gold, and Platinum. These categories indicate the level of coverage and the cost-sharing structure. Bronze plans, for example, typically have lower monthly premiums but higher out-of-pocket costs. Compare the metal categories to find the right balance of coverage and cost for your needs.
• Total costs: In addition to the monthly premium, consider other out-of-pocket costs such as deductibles, copays, coinsurance, and out-of-pocket maximums. Evaluate the total costs to ensure you can afford the plan and that it provides adequate financial protection.
• Customer reviews and ratings: Research customer reviews and ratings for each insurance provider to gauge their reputation and level of customer satisfaction. This can give you insights into the quality of their services, claims processing, and overall customer experience.
• Exclusions: Carefully review the exclusions listed in each insurance plan. Exclusions are situations where the insurer will not cover your claim. Understand these exclusions to avoid surprises and choose a plan that covers your specific needs.

Check the Insured Declared Value (IDV)

The Insured Declared Value (IDV) is the maximum amount your insurer will pay out if your car is damaged beyond repair or stolen. It is the approximate current market value of your car, and the price of your car insurance policy will be based primarily on the IDV. The IDV is also the sum insured on your car insurance policy.

When you buy a new car, the IDV is based on the manufacturer's selling price, taking depreciation into account. The formula for calculating the IDV is:

IDV = (Manufacturer’s Selling Price – Depreciation Cost) + (Accessories Cost – Depreciation of These Accessories).

If you have not added any accessories to your car, the formula is:

IDV = Manufacturer’s Selling Price – Depreciation Cost.

The IDV is one of the primary factors that influence the car insurance premium amount. The higher the IDV, the higher the premium. You can use an IDV calculator to check the IDV details.

When switching from third-party insurance to comprehensive insurance, you will need to set the IDV of your car. A higher IDV will result in a higher premium, but it will also mean a higher claim settlement amount. On the other hand, a lower IDV will result in a lower premium, but a lower claim settlement amount.

It is important to set the correct IDV for your car. If you set a lower amount, you might receive less money than you are entitled to. On the other hand, if you set a higher amount, you will have to pay a higher premium.

Check the deductibles

When upgrading your insurance from third-party to comprehensive, it is important to check the deductibles. A deductible is the amount you pay out of pocket to repair or replace your vehicle after your claim is approved. The remaining approved costs are then covered by your insurance company, up to the actual cash value of your vehicle.

There are two types of deductibles: voluntary and compulsory. You can choose to pay a voluntary deductible, which reduces the cost of your insurance. However, this means you are voluntarily promising to bear a part of the claim amount and will receive a lesser sum at the time of the claim. On the other hand, a compulsory deductible is a negligible amount paid at the time of claim settlement.

The amount you choose to set as your deductible will determine your out-of-pocket costs for repairs and impact your car insurance rate. A lower comprehensive deductible will save you money on out-of-pocket repair costs, but you will usually have a higher insurance rate. Conversely, a higher deductible typically means a lower insurance rate, but you will pay more out of pocket for repairs.

When choosing your deductible, it is important to consider your budget, the value of your vehicle, your savings, and the likelihood that you will need to make a claim. If you live in an area where hazards such as natural disasters, vandalism, or collisions with wildlife are common, you may benefit from a low comprehensive deductible as you may have a higher likelihood of filing a claim.

Additionally, some states require insurers to offer $0 deductibles for glass-only replacement claims. It is also worth noting that if the repair costs are less than your comprehensive deductible, you would typically have to pay for the repairs yourself as your insurer will only cover damage that exceeds your deductible amount.

Check the No Claim Bonus (NCB)

No Claim Bonus (NCB) is a reward given by insurers for not raising any claim in a policy year. It is a discount on the premium for the next year, which can be as high as 50% for five consecutive claim-free years. This is a great way to save money on your insurance premium.

The NCB is tied to the policyholder, not the vehicle. So, if you sell your car and buy a new one, the NCB stays with you and can be transferred to your new insurance policy. It can also be retained if you switch insurance providers. However, you must renew your policy within 90 days of its expiry to keep your NCB.

You can protect your NCB by purchasing an NCB Protection Add-on. This optional cover lets you make a claim without losing your NCB. It is especially useful if you own an expensive car or live in an area where your vehicle is exposed to damage.

To check your NCB, refer to the NCB slabs, which are applicable during the policy renewal process. The NCB calculation will also be mentioned in your policy document.

Frequently asked questions