Insuring your New Car

Insurance amount: The amount of insurance is equal to the market value of the vehicle and not the original purchase price or book value of the vehicle.

Renewal: The insurance policy needs to be renewed before expiry of the policy period. Any delay in insurance renewal can deprive you of the insurance benefits and also attract a penalty while renewing. Remember, it is against the law to drive an uninsured car. Moreover, if the insurance policy isn’t renewed within the period of validity, the car will have to be brought to the insurance company office for inspection.

No-claim bonus: No-claim bonus (NCB) clause is basically applicable to holders of comprehensive insurance policy. The clause refers to the discount that a policy holder can receive on the amount of premium payable, if he/she has not lodged any claim during the year.

The policy holder can claim a 20%, 35%, 50% and 65% discount in the premium in the first, second, third and fourth year of holding the policy. NCB cannot be claimed in the 5th year premium. The discount is based upon the claim that he has lodged with the company. Besides this, NCB is important when you are buying another new car because you can transfer this record(clean claim period) to your new vehicle.

Let us work out some numbers on this. Say you have to pay Rs. 5000 as premium of your car. However, as you have a clean record, you would have to pay just Rs 1750, when you enjoy NCB @ 65%. Now, when you buy a new car which has a value higher than the current one, premium is undoubtedly higher. But you get to transfer the bonus percentage onto your new car.

So, if on your new car, the premium that you have to pay is Rs 10,000, because of the NCB, you need to pay only Rs. 3500; that is, you save Rs 6500. But remember that the new car purchase has to be made within three years of sale of the old car.