Ramesh had to pay an annual car insurance premium of Rs. 15,000. He was an experienced driver and felt the money was being spent unnecessarily. Three years into the plan, however, he met with a road accident. It was not his fault. A bus, that had jumped a traffic signal, came and hit his car suddenly. He was safe, but the vehicle was badly damaged and the repair costs ran up to Rs. 75,000. He had a cover of Rs 1 lakh and so, after deducting a few costs, he received a claim of almost Rs. 60,000. This is when he realized that car insurance indeed helped him save money in the long run.
Understanding car insurance
Car insurance is bought to protect your vehicle. It is compulsory in India and every car owner needs an insurance policy. The policy covers you as well as the third party. So if an accident occurs, you may have to pay the damages to the owner of the other car involved in the accident. This is where an insurance policy will help you out.
How does car insurance work?
Car insurance works in a very straightforward manner. You pay a premium and if an accident happens, the insurance provider pays out the claim amount. This is the basic principal of car insurance. However, there are some features like the no-claim bonus and the deductible in car insurance that help you save money. Let us take a detailed look at these:
- No claim bonus (NCB) – As a policyholder, if you don’t make any claims in a policy year, you get a reward from the insurer. This is known as the NCB. The NCB is offered in the form of a discount on the premium of the following year. This helps you save a considerable amount of money and also encourages you to drive safely.
- Deductible:. Deductible is the amount of money that gets deducted from the claim and is paid by you. If you opt for a higher deductible, your premium amount decreases. So you can control your car insurance costs accordingly and save money in the long run. Please note here that you should only opt for a higher deductible if you are very confident of your driving skills. Also, you should be able to afford the deductible amount, in case you have to pay this amount.
Saving money with car insurance in the long run
We saw how Ramesh was able to save money in the long run with car insurance. If you play your cards properly, you too can save big. The premium you pay might look like a huge amount now, but at the time of a claim, it will look like an intelligent investment. Also, with the help of the NCB and deductible, you can control your premium expenses. So eventually you will receive a large cover for a much smaller portion that you pay. Remember how our friend Ramesh got close to Rs. 60,000 from his insurer after paying a sum of less than Rs 40,000 (after taking the NCB and deductible into account) as premiums?
There are many reasons that make car insurance an absolute necessity. Apart from the legal requirements, you should get the policy because you will end up saving money in the long run. Most people drive carefully, but accidents still take place. And since you cannot predict such things, it is wise to buy a good car insurance plan right away. You can save even more money by comparing the plans online. So what are you waiting for? Get hold of the best car insurance policy today!