Saving on motor insurance premium ::Business Line

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With the Insurance Regulatory and Development Authority increasing third-party premium rates, the cost of motor insurance has increased. Annual premium on third-party insurance of a Ford Figo or a Maruti Swift was Rs 800 two years back, compared with Rs 925 today.

The insurance premium on a motor vehicle consists of two parts: own damage premium (covers damage of the insured vehicle) and third-party premium (covers damage to a third party and/or its vehicle). While own damage (OD) premium is determined by a vehicle's insured declared value (value of the vehicle after depreciation), third-party premium (TPP) is fixed by the Authority and depends on the volume of the vehicle.

Here are three ways in which you could save on your premium outgo for motor insurance policies.

A NO-FRILL POLICY

 Most private general insurers offer motor insurance polices online. This could save almost 10-15 per cent of the total premium on the vehicle. The other way to save substantially is by taking a basic cover.

Motor insurers today offer riders like an accident cover, cover for loss of personal belongings, cover for consumables such as nuts, bolts, etc., with the main policy. Though these provide additional cover, do not blindly take all of them; riders come with an added premium. For instance, with ICICI Lombard the total premium on a basic petrol version of a new Ford Figo is Rs 10,418. If you take an additional cover for Rs 30,000 on electrical and non-electrical accessories (generally excluded from a basic policy), the annual premium would rise by Rs 966 to Rs 11,384.

The premium outgo can be reduced also if the policyholder agrees to share a part of the claim, called voluntary deductible. With Bajaj Allianz a policyholder who is willing to share an amount of Rs 5,000 of the claim can see the policy premium (OD) reduce by almost 25 per cent (subject to a maximum of Rs 1,500).

THE NO-CLAIM BONUS

No-claim bonus is the incentive given to the policyholder for his safe driving habits. For one year of no claim on the policy, one will get a 20 per cent discount on the OD premium. This discount rises to 50 per cent when there are no claims for five consecutive years. So do not niggle your insurer with claims such as a scratch on your car's door that may require a minor painting work. Also remember that no-claim bonus is transferrable. In case you sell your vehicle and buy a new one, you can set off the accumulated bonus against the premium of the new vehicle.

ELIGIBLE FOR DISCOUNT?

 Insurers provide discount on OD premium if anti-theft devices approved by the Automobile Research Association of India are installed. Continuing on the above example of a new Ford Figo car, ICICI Lombard gives a discount of Rs 206 for vehicles installed with an anti-theft alarm. Bajaj Allianz provides a discount of around 2.5 per cent of the premium up to a maximum of Rs 500. Some insurers such as HDFC ERGO give discounts to vehicle owners who are in the medical profession or in Central Government service. So, when making an online purchase, provide information about your background. Being a member of recognised automobile associations can also get you discounts on premium.