How to Reduce Your Car Insurance Premium – 17 Important Tips

How to reduce car insurance premium

Multiple Motor Insurance companies are working in India and providing car insurance. These companies provide different offers and plans regarding. Means we have lots of options and opportunity to find out the best one at the minimum car insurance premium.

Car insurance pricing is increasing in India rapidly and even IRDA has recently announced an increase in third party premium. But if you know some factors then you can reduce the premium for package car insurance policy.

Either you or me, in fact everyone wants a minimum premium for his or her car insurance policy.

1- Compare with Multiple Insurance Companies

Whenever you are purchasing an insurance policy for your car then the first thing that should come in your mind is – “Let’s Compare it”. Select 4 to 5 companies at least and gets some quotations from each one.

Check the Benefits points and premium. You will see a lot of difference in premium. Now you Select the company which is providing you maximum benefits with less premium.

Apart from premium and benefits consider some other points also. You also check the company reputation and claim settlement ratio. You should not have any stress at the time of any claim. It should be easy and hassle-free.

Example 1

Company ACompany B
Premium = Rs. 20000/-Premium = Rs. 23000/-
Comprehensive Policy with Zero Depreciation Add OnComprehensive Policy with Zero Depreciation Add On
High Claim Settlement RatioHigh Claim Settlement Ratio
Good Company ReputationGood Company Reputation

In this case, you should select Company A because premium is lesser than Company B and the other factors are the same.

Example 2

Company ACompany B
Premium = Rs. 20000/-Premium = Rs. 23000/-
Comprehensive Policy with Zero Depreciation Add OnComprehensive Policy with Zero Depreciation Add On
Low Claim Settlement RatioHigh Claim Settlement Ratio
Poor Company ReputationGood Company Reputation

In the above example the premium of company A is lesser than Company B. However, reputation and claim settlement ratio of company B is good.

In this case, you should not go with company A because you may face some problems at the time of the claim.

2- Tariff Discount

Most of the insurance companies provide discount on tariff premiums (Basic Own Damage). This discount depends on Car manufacturer, Model, No claim Bonus, etc.

When you take a quotation from an agent, try to negotiate the discount. There may be possibilities to get more discount than the quotation you have. Companies have some internal approval system which can be given to good customers.

But for this sometime you have to do some extra negotiation from the agent and sometimes you get it automatically if you have good NCB.

Tariff discount depends on make and model because the loss ratio of the different cars is different for insurance companies. Insurer provides more discount on favorable models and avoid or provide less discount for those models which are not favorable for them. Here favorable means low risk for companies.

3- Automobile Association Membership

If you are a member of the Automobile Association of India then you can get some extra discount. For such member insurance companies give a discount of 2.5% or maximum Rs. 200 on basic own damage premium. Companies provide this discount on the basis of some assumptions.

Whenever companies find that you have the membership of AAI then they assume that you may be a good use for a car. Being a member, you may be a responsible and safe driver. 

It means you may be less prone to damage the car. That’s why you get a discount for being a member of the Automobile Association of India.

4- Renew Your Policy On Time

Lapsation of your car insurance policy may give you a big dent on the premium while buying a new policy. On lapsation of the policy you may get few setbacks: –

  • You will need an inspection for your vehicle. Some companies take charges for vehicle inspection.
  • You may lose your No Claim Bonus if the policy expiry date cross 90 days.
  • You may get less tariff discounts if you don’t have No Claim Bonus. Because sometimes companies offer more discounts for NCB cases.

I will advise you to set a reminder and renew the policy on time because it will affect the premium. Renewing the policy on time help to reduce the premium. You may need to pay a higher premium in comparison to renewing on time.

5- No Claim Bonus (NCB)

It is a discount which you get on the renewal of your car insurance policy when you don’t have any claim in a policy year. It helps you to reduce your car insurance premium because you get the No Claim Bonus discount on basic own damage premium.

High No Claim Bonus represents that you are a good customer to the company. In case of good NCB companies also provide good tariff discount on own damage premium.

You should avoid a claim for small damages. It will help you to accumulate a bonus in your insurance policy. Don’t waste your no claim bonus for small damage when you see that NCB is more beneficial than claim amount.

6- Transfer of No Claim Bonus

Accumulation of No Claim Bonus (NCB) is always beneficial for you. You get the discount year by year till when you have NCB in your Car insurance. But in case you sell your car and purchase a new one then even its benefits don’t over.

You may get surprised that you can transfer your existing NCB of your old car to New car also and get the No Claim Bonus discount. No Claim Bonus is always connected to the individual not to the car. So, that you can transfer it.

It will be very helpful to reduce the premium of your new car insurance policy. You need to do is that you take the No Claim Bonus Reserving letter from the insurer by doing the required documentation.

Submit the reserving letter to a new insurer from where you are purchasing the Insurance policy for your new car.

7- Voluntary Deductible

You can add voluntary deductible in your policy. Almost all motor insurance companies provide this option and premium can be reduced with adding this option.

VD (Voluntary Deductible) is the excess amount paid by the policyholder at the time of claim settlement. You should choose this very wisely.

I think you should not select a very high amount of VD. Because you have to pay the VD amount in each claim either claim amount is small or big.

Example

Option AOption B
Deductible Amount = Rs. 2500/-Deductible Amount = Rs. 8000/-
Claim Amount Filled = Rs. 10000/-Claim Amount Filled = Rs. 10000/-
Claim Amount Received Rs. 7500/-Claim Amount Received Rs. 2000/-

In both the case filled claim amount is the same. But in the case of Option A you are getting the claim amount of Rs. 7500 after the deduction of VD.

However, in the case of Option B you are getting the claim amount of Rs. Only Rs. 2000 because you selected high VD on time of buying your car insurance policy.

High VD is only beneficial if filled claim amount is high.

Choose this option very wisely so that you do not pay a high amount of voluntary deductible at the time of claim settlement. If you are doing safe driving and very rare you file any claim then this option is very good for you.

8- Multiple Cars

If you have multiple cars then you can manage it well to reduce your car insurance premium. You can negotiate your premium – discount with the insurance company. You can do this by offering to take all cars policy from one company only.

Some companies can give you extra discount if they get multiple cars from single owner.

You can take in another way also. The discount offered by insurance companies depends on the manufacturer and models of the car. Some models can be a favorable model for companies.

It is because they have less claim on these models. So, you can check each car premium from different companies. By doing this exercise you can select one by one company which is offering a lesser premium for the particular car.

9- Bundle Plan

You can work out this option also to reduce the premium. You can have some reduction in premium if you are buying a bundle plan for your car insurance.

It depends on company to company. Ask your agent to provide the best possible combinations for you. If you find that option is suitable and the best possible premium then you can opt for it.

10- Online Discount

We all are living in the internet world and insurance companies are available online also. You can check the available premium online. Some time companies offer extra discounts on online purchases. It is because their marketing cost gets reduced in this case.

Nowadays the company gives instant chat and other help options to get any assistance while buying policy.

You have both the option online and offline. Check your car insurance premium on both the platform and select the suitable option for you.

11- Selection of IDV

The selection of IDV (Insured Declared Value) is a crucial part of while taking the policy for the vehicle. It directly affects your premium. If you take too high IDV then premium will be high and if it take too low IDV then premium will be less.

Now what to do?

You should always go for correct IDV for your vehicle because ultimately it is your car value. You will get the theft claim or total loss claim amount according to this IDV.

You should not go for too high or too low IDV. Select it according to your car vintage and market value. You can optimize your premium with the correct IDV.

12- Multi Year Policy

If you are taking any car after September 2018 then you can take a long-term comprehensive policy also.

You may get more discount for three years comprehensive policy (three-year own damage plus three-year third party) in comparison to one-year own damage plus three-year third-party policy.

13- Selection of Add On Covers

The premium of a policy depends on how many add on cover you select. Zero depreciation, Engine cover, Consumable cover, Tyre cover, Return to Invoice, and many other options are available.

If you want to reduce the premium then you should avoid unnecessary add on cove. Check which cover is beneficial for your car and which is not. Take the coverage according to your needs only. Taking the cover which is not required for your car then you should avoid it.

if you are using your car very rare then adding so many covers is may not require. Take the necessary cover and add on which are not avoidable.

14- Old Vs New Customer

Being an old customer is also an important factor to reduce the car insurance premium. Companies never would like to let go of their customers to another company if you are profitable for them. They will always try to retain you as much as possible.

That’s why most of the companies offer more discounts to their old customers than new customers. So, if you are renewing your policy from the same insurer then you can have a lesser premium than a new company.

15- Anti Theft Discount

You have the chance to reduce the premium if you have installed an anti-theft device in your car. Insurance companies provide you an extra discount if you have installed an Anti -Theft device approved by the Automobile Research Association of India (ARAI).

This discount is 5% or maximum Rs. 500. You get this discount because this installation of this device reduces the chance of theft of a vehicle. Companies get less theft claims from this type of customer.

If have installed ARAI approved device in your car then your also eligible for this discount.

16- Avoid Unnecessary Accessories

If you want to actually reduce the premium then you should avoid unnecessary accessories. Because more accessories will cost you more premium.

Check your requirement and have only those things which are very essential in your car.

17- Profession Discount

Some companies also offer extra discounts for some professions like Teachers, Doctors, Military Person, Chartered Accountants, etc. People of these professions use their vehicles very less and have well maintenance of it also.

So, the chance of damage or theft of a vehicle is reduced. That’s why some companies offer extra discounts to them.

Whenever you are buying insurance policy for your car then you may keep all the above points in your checkpoints and get the best possible quotation from your agent. A small extra discount can give you good support to reduce the premium.