8 Key Factors to Consider When Choosing Car Insurance

Why Choosing the Right Car Insurance Matters

Many car owners in India purchase insurance only to meet the mandatory third-party insurance requirement, without considering whether the policy provides enough coverage. This approach often leads to unpleasant surprises during claims.

Here’s why choosing the right car insurance policy is crucial:

• Financial Protection: Car accidents, natural calamities, or theft can lead to heavy repair or replacement costs. A well-chosen policy saves you from significant economic burdens.
• Legal Compliance: As per the Motor Vehicles Act, third-party car insurance is mandatory in India.
• Personal Safety: A good policy includes personal accident cover, ensuring you and your passengers are financially secure in case of injuries.
• Peace of Mind: Knowing you’re covered for different risks allows you to drive stress-free.
• Added Benefits:Policies with comprehensive coverage and add-ons provide extra services like roadside assistance, zero depreciation cover, and more.

The following sections will help you understand how to choose car insurance wisely.

Decide Between Third-Party and Comprehensive Insurance

The first decision you need to make is choosing between third-party insurance and comprehensive insurance. These are the two primary types of car insurance available in India.

Evaluate the Insured Declared Value (IDV)

The Insured Declared Value (IDV) is the current market value of your car and is the maximum amount your insurer will pay in case of theft or total loss. Understanding IDV is vital when choosing car insurance coverage.

Why IDV Matters:

• Higher IDV = Higher claim amount, but also higher premium.
• Lower IDV = Lower premium but less payout during claims.
• Depreciation reduces IDV every year; negotiate with your insurer to keep it fair.

Example: If your car’s market value is ₹8 lakh:

• Choosing an IDV of ₹8 lakh ensures full compensation if your car is stolen.
• If you set IDV at ₹6 lakh to lower the premium, you bear the shortfall during claims.

Pro Tip: A reasonable IDV ensures adequate protection without overpaying for premiums.

Compare Premium vs Coverage Benefits

While lower premiums are tempting, a cheaper policy may not always be the right choice. When evaluating how to choose a car insurance policy, compare the premium costs with the coverage benefits offered.

Key Factors to Compare:

• Scope of Coverage: What damages are included (natural calamities, human-made disasters, theft, fire)?
• Exclusions: What’s not covered (drunk driving, wear-and-tear damages, etc.)?
• Add-ons Included :Some policies offer free add-ons like personal accident cover or roadside assistance.
• Deductibles:Higher deductibles can lower your premium amount but increase your out-of-pocket expense.

Tip: Use online comparison tools to find the best car insurance in India offering value-for-money coverage instead of choosing solely based on the lowest price.

Look at the Claim Settlement Ratio of Insurers

The Claim Settlement Ratio (CSR) indicates the percentage of claims successfully settled by an insurer out of the total claims received in a year. A higher CSR means a better chance of your claim being processed without unnecessary delays or rejections.

Why CSR is Important:

• Helps you identify reliable insurers.
• A low CSR could mean trouble during the claim process, even if the premium is lower.
• IRDAI publishes annual CSR data for insurers in India—use this to shortlist trustworthy companies.

Pro Tip: A CSR above 90% is generally considered good when deciding how to choose a car insurance company.

Check for Available Add-on Covers

Add-ons enhance the scope of your car insurance policy. They provide customised protection for specific needs, making your policy more comprehensive.

Popular Add-on Covers:

• Zero Depreciation Cover: Ensures full claim amount without deducting depreciation costs
• Engine Protection Cover: Covers repair costs for engine damage due to water ingression or oil leakage.
• Roadside Assistance: Provides emergency help for breakdowns or towing.
• Return to Invoice Cover: Reimburses the full invoice price of the car in case of total loss or theft.
• Consumables Cover: Pays for items like engine oil, nuts, and bolts during repairs.

Though these increase the premium slightly, they offer valuable long-term benefits. Hence, evaluate add-ons before selecting a policy.

Understand Deductibles and Their Impact

A deductible is the amount you agree to pay out of pocket before your insurer settles the claim. Choosing the right deductible is a crucial part of how to choose a car insurance deductible.

Types of Deductibles:

• Compulsory Deductible: A fixed amount mandated by IRDAI that you must bear on every claim.
• Voluntary Deductible: An additional amount you choose to pay; opting for a higher voluntary deductible reduces your premium but increases your claim expenses.

Pro Tip: Select a voluntary deductible amount that lowers your premium but doesn’t cause financial strain during an accident.

Review Network Garages and Cashless Facility

Most insurers have tie-ups with network garages where you can avail cashless repairs—meaning you don’t pay upfront; the insurer settles the bill directly with the garage.

Why This Matters:

• A wider network of garages ensures accessibility during emergencies, especially when travelling.
• Cashless facilities save you from arranging funds immediately after an accident.
• Non-network garages may require you to pay first and then claim reimbursement.

Tip: Choose an insurer with an extensive network of authorised garages near your location for hassle-free claims.

Go Through Customer Reviews and Ratings

Online reviews and customer feedback help you understand the real-world performance of an insurer.

They reveal:

• Claim processing time
• Quality of customer service
• Hidden charges or policy limitations
• Ease of renewal and online services

Pro Tip: Look for insurers with:

• Positive reviews on claim support and transparency
• Simple documentation processes
• High ratings on trusted portals and forums

This factor is often overlooked, but is essential in how to pick car insurance that provides long-term satisfaction.

Tips to Buy the Right Car Insurance Policy Online

With the rise of digital platforms, buying or renewing car insurance online has become easier. Here are some tips on how to choose car insurance renewal and purchase policies digitally:

• Compare Multiple Insurers: Use online aggregators to evaluate premiums, features, IDV, CSR, and add-ons.
• Read Policy Wordings: Understand inclusions, exclusions, deductibles, and claim procedures
• Check for Online Discounts: Many insurers offer lower premiums for online purchases due to reduced administrative costs.
• Opt for Paperless Documentation: Saves time and ensures instant policy issuance.
• Look for 24/7 Customer Support: Crucial for emergencies and claim assistance.

Following these steps to buy car insurance ensures transparency, affordability, and comprehensive coverage.