9 smart ways to reduce your vehicle insurance premium

Vehicle Insurance is the only mandatory insurance in our country. Here are some smart ways to save more money and improve our monthly cash flow.

Background

Vehicle Insurance is the only mandatory insurance in our country. And most of the times, we don't pay much attention to what constitutes the premium of a vehicle insurance. Once we understand the details, it is not tough to find out what we need to do, in order to reduce the premiums we need to pay every year. 

A rupee saved is five rupees earned ~ FOOPS!

Here are some ways you can save on your vehicle insurance premiums:

1/ Opt for 'Pay as you drive' insurance

Instead of a flat rate insurance, you might want to opt for 'Pay as you drive' insurance. This is a relatively new concept in the Indian auto industry available since 2020 under the regulatory sandbox guidelines by IRDAI, and is allowed to be marketed only by a few insurers. As the name suggests, it’s a usage based offering, wherein the insurer charges premium only for the number of kilometers fixed at the policy’s inception. Look at it the way health insurance and life insurance works, wherein we decide the cover we want, based on our own judgment of needs. Just the same way, in this kind of insurance, you decide how many kilometers you will drive in a year, and accordingly you are charged the premium for the cover. The insured, however, gets the same benefits as in a traditional comprehensive cover. So if you drive occasionally, this would be a good way to cut premium because fewer miles means lower premium.

2/ Choose Add-on covers wisely

Not every damage is covered by base cover. Add-ons help increase the scope of your comprehensive cover, but they also raise your premium. You should pick the add-ons depending on your need. As an example, if you don’t live in an area that has water logging, you don’t need the engine protection cover. There are several add-ons that are less important but cost the same as others. So you can easily forgo those like daily allowance cover, or the one that covers loss of personal belongings, unless you carry costly belongings in your car on a regular basis.

3) Don’t go for too many modifications or upgrades

If you alter your car in any way, be it installing a CNG kit or an electronic device, you need to inform the insurer as it may impact the premium. If you don’t inform, your claim may be rejected later. Modifications that increase the chance of theft, such as wheels, car interiors or paintwork, should be avoided. Similarly, any change in engine or mechanics to enhance power or increase acceleration, leads to an increase in risk and a rise in premium. Other modifications you can avoid are bull bars, pressure horns, tinted head or tail lights, fake carbon fibre, flashing brake lights and over or undersized wheels and tyres.

4) Avoid small claims

If your car suffers minor damage like scratches or small dents, you should avoid making a claim because you will not be eligible for a no-claim bonus (NCB) at the next renewal. NCB is a discount in premium you get from your insurer for not filing claims during the policy term and can range from 20-50%. You can avail of this if you renew the policy within 90 days of expiry. So, if your car damage is worth Rs 2,000 or so, and you are scheduled to get a Rs 6,000 NCB next year, it is better to pay the amount from your pocket. Read more about No Claim Bonus in this blog post.

5) Install antitheft devices in your car

Another easy way to reduce your car premium is to lower the risk of having the vehicle stolen. The higher the safety, the lower your premium. You can do this by installing anti-theft devices like gear locks, antitheft alarms, steering locks from registered manufacturers to get a discount on the premium. But dont over do.

6) Raise your deductible

Deductible is the amount that you pay from your pocket before the claim is covered by the insurer. The higher the deductible, the lower the premium that you pay on your insurance. This is the same concept that is applied to health insurance also. So if you are confident about your driving skills or do not drive very frequently, it may be a good idea to opt for a higher deductible, to bring down your premium.

7) Transfer NCB for new car

If you have amassed a huge no-claim bonus over 6-7 years, and are planning to buy a new car, you could cut down your premium considerably by transferring the NCB from your old insurance policy to the new car insurance. Most people tend to forget doing this one time paperwork in the excitement of the new car, but it pays long term dividends.

8) For older cars, take only third-party cover

While a third-party cover protects you financially against death, injury or property damage of a third party in an accident involving your vehicle, it is imperative to have an own-damage cover to protect against expenses incurred in damage to your own car. So not buying a comprehensive cover to cut premium will be usually unwise. However, it may make sense to buy only the third-party cover if the value of your car is very low or it’s an old car. If your car is very old or you are planning to sell the car soon, then opting only for third-party insurance is recommended as it is cheaper than comprehensive plans. Besides, you may spend less on repairs in case of any damage than the premium you pay for the comprehensive cover.

9) Pay premium on time, buy online cover

Two simple ways to reduce your premium are to compare and shop online for your insurance, and to pay your premium on time. If you don’t pay your premium on time, the insurer may see it as a risk and could raise your premium amount.

Regards

Manoj Arora
Official Website