When we buy our dream vehicle, we make all possible enquiries about specifications, colours available, safety features and more. But the same enthusiasm turns into a fraction percentage when enquiring for an insurance plan. Although a third-party motor insurance policy is mandatory as per the Motor Vehicles Act, most individuals skip or miss-out on renewing their policies. Either it is due to lack of interest or unawareness about the renewal date.
However, a motor insurance policy is essential for your vehicle as it helps in protecting against damages, accidents, loss or theft. The coverage to your insurance plan depends on the type of insurance policy opted – third-party or comprehensive.
The renewal for your third-party policy is simple and straightforward. Since a third-party policy offers coverage against damage to another’s property, there isn’t any inspection to your vehicle. Moreover, the premiums for a third-party policy are regulated by The Insurance Regulatory and Development Authority of India (IRDAI). Each year it publishes the premiums for different categories of vehicles according to their engine capacities.
Comprehensive policy renewal, on the other hand, is more detailed than its counterpart.
Since a comprehensive policy offers protection against the damage to others, including their property, as well as the policyholder, the process is different than renewing a third-party cover.
When your comprehensive motor insurance policy is near its renewal date, the insurer sends a reminder for renewal. This reminder is enclosed with a renewal notice. The renewal notice contains details about the premium and the terms of your policy based on existing policy. In some cases, the inspection of your vehicle may be undertaken, and an inspection report is furnished. You can opt for various add-ons at the time of renewal of your motor insurance like a zero-depreciation cover, engine protection cover and many more. These will have an impact on your renewal premium. Finally, you pay and renew your insurance policy as per the existing terms or new terms as decided. The above renewal process is more or less similar in case of your personal or commercial vehicle insurance.
While we understand the renewal process, let us look at the factors that influence the premium at the time of motor insurance renewal –
- The model and make of your vehicle are the starting point in determining the premium.
- The age of your vehicle is the next important factor that is considered.
- Next, the insurer considers the Insured Declared Value or as popularly abbreviated to IDV. It is the maximum amount that your insurer pays in case of theft or total loss of your vehicle. The IDV accounts for the depreciation on your motor vehicle.
- Further, No Claim Bonus or NCB is considered. NCB is a concession in the form of reduction to your premium for a claim-free policy year. NCB starts at 20% and gradually goes up to 50% for each policy period where no claims are made.
- Any add-on policy covers are taken into account when computing your premium amount.
- The place of registration influences the premium costs. The risk that the insurance company has to undertake in Tier 1 cities is different from others.
Ideally, you should reassess you coverage during two wheeler / car insurance renewal. Make sure you evaluate the present situation and opt for a suitable insurance plan at the renewal date.