How to cut down premium for vehicle insurance? Your driving habits, vehicle usage may matter

Vehicle owners need to factor in the rising cost of insurance too apart from the fuel prices. With an increasing number of road accidents and theft of vehicles and their parts purchase of an insurance policy is a sine qua non. But how to reduce the premium for vehicle insurance offered by both public and private companies.

Usage-based insurance scheme
Traditionally, vehicle insurance is decided according to the vehicle's make and model and not according to the consumer's driving style. But one can pay the premium based on one's driving habits and use of vehicle, which means the distance covered. In such a case premium is calculated on the basis of the distance travelled by the vehicle and the owner can deposit money according to the usage. This way the premium amount can be reduced significantly. This modern concept of usage-based insurance is called Telematics.

No-claim bonus
he insuree stands to gain with no-claim bonus or NCB. No-claim bonus will be paid by the insurer for every year in which there are no claims. NCB begins at 20 per cent and may increase up to 50 per cent if no claims are made for five consecutive years. NCB discount reduces one's premium quite significantly. Thus vehicle owners can save some amount when claims are evaluated based on the ratio of no-claim bonus.

Avoid making claims for small damages
If one makes claim for minor issues then it may lead to a situation where one might even lose the NCB. Moreover, it will also result in ineligibility for NCB next year. How does that work? Suppose you are eligible for Rs 5,000 as NCB discount next year. But your vehicle gets partially damaged, requiring repairs worth Rs 2,000. If you seek a claim for repairing the minor damages then you might end up losing your Rs 5,000 NCB eligibility!

Suo moto deductibles
Almost all insurance schemes have mandatory deductibles. Deductibles are the amount that an insured person has to bear as part of the claim amount. After determining Rs 1,000 in your policy as deductibles and the claim amount to be paid is Rs 10,000, the insurer will pay you Rs 9,000 minus the Rs 1000 that you have to bear on your own. The insurer decides the mandatory deductibles. But if you choose a higher amount as deductibles and agree to bear more amount in the event of loss, then it will help in reducing the premium.

Buy only third-party cover for old vehicles
Vehicle insurance has two parts: Third-party cover and own-damages coverage. These two are part of the comprehensive cover. The third-party cover is mandatory. This will secure the vehicle owner from liability of compensation to the third party whose vehicle is damaged by you. But since the third-party coverage does not give protection to your vehicle, it is advisable to take a comprehensive cover. However, the vehicle's value declines with each passing year. If your car is more than 10 years old then it would be ideal to take only a third-party cover.

Install anti-theft equipment
There are two major benefits of installing anti-theft equipment on your vehicle. The equipment enhances the security and safety of your vehicle. If you have installed an anti-theft device in your vehicle then the insurer promises a discount in premium. But one would be eligible to get the discount only if anti-theft equipment approved by the Automobile Research Association is installed in the car.

(The above information is provided by Gurdeep Singh Batra, the Head of the Retail Insurance Underwriting Department of the Bajaj Alliance General Insurance.)

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