When is the Right Time to Switch from Third-party to Comprehensive Car Insurance?

Getting car insurance is mandatory in India. While you may have known it for a while and have basic insurance coverage in place, sometimes it is not enough. The mandatory third party car insurance covers you legally. However, it does not provide enough coverage and may make you feel helpless and vulnerable in case of damage to your own vehicle. This insurance covers damages incurred by a third party only and provides no financial security to your vehicle in case of damage or theft. This is why switching to a comprehensive policy is not just ideal but important too.

Understanding Third-party Car Insurance

Third-party car insurance covers damage and bodily injuries to a third party due to an accident with your insured vehicle. The premium of third-party car insurance is decided by the IRDAI and the claim is usually settled through the court in case of severe bodily injuries or death of a third party.

The claim settlement amount is decided by the insurance company as per your policy document. The final claim is decided based on several factors such as the age of the deceased person, income, family considerations, other damages etc.

Remember, if you are caught driving your car without a valid third-party insurance plan, you will have to pay a hefty fine and/or face imprisonment, depending on the situation.

Understanding Comprehensive Car Insurance Policy

In addition to wholesome third-party coverage, a comprehensive car insurance policy covers damages or losses incurred by your vehicle. Hence, it covers both first and third parties. The claims for your vehicle damage are settled by the insurance provider. It is important to note that since it provides wholesome coverage, the premium of a comprehensive insurance policy is higher than the premium of third-party insurance.

Who Should Switch from Third-party Car Insurance to Comprehensive Car Insurance?

If your priority is a stress-free driving experience then choose comprehensive car insurance over a third-party insurance policy. Also, new or inexperienced drivers, who recently purchased a car, should opt for comprehensive car insurance for exhaustive coverage.

Alternatively, if you drive your car around accident-prone areas regularly, live near flood and other natural disaster-prone areas, or have many car thefts reported in the area of your residence, then go for a compressive car insurance policy.

Factors to Consider Before Switching Policies

1. Policy cost

Third-party insurance gives limited coverage and that too, only to the third party involved in the accident. The policy covers physical injuries and property damage to a third party in case of an accident with your vehicle. There is, however, no coverage for injuries or damages. Since comprehensive coverage increases the scope of coverage, it also increases the cost of the policy. The cost of a comprehensive insurance policy depends on various factors such as the make and model of your car, estimated value, additional covers, and the insurance provider you choose.

2. Coverage

As earlier discussed, coverage is the major change in your policy when you switch from a third-party to a comprehensive insurance policy. Several factors can cause damage, including natural calamities, fire, riots, vandalism etc. These are all covered under your comprehensive insurance policy, along with coverage in case of theft. If your car gets stolen, you just need to inform the police and get in touch with your insurance provider. If the police give a non-traceable report, it implies the vehicle cannot be found and you are allowed to receive a claim from the insurer.

3. Insured Declared Value

Insured Declared Value or IDV is the market value of your car decided by the insurance provider. The premium amount of your policy is primarily based on the insured declared value of the car. It is also the maximum amount that your insurance company will pay in case of damage or theft. Hence, it is important to set the right IDV when buying car insurance. While setting a higher amount leads to a higher premium, setting an amount too low to save on premium costs will lead you to receive less money in case of an unfortunate incident.

4. Deductibles

These are the values that you need to consider when filing for the claim. There are compulsory and voluntary deductibles. Paying for voluntary deductibles reduces the cost of your policy. However, it means that you are agreeing to pay for a part of the claim amount, which means receiving a smaller amount at the time of claim settlement.

5. No Claim Bonus

At the time of renewing your car insurance policy, you are awarded a No Claim Bonus if you have not raised a claim against your policy for the entire year. No Claim Bonus is only applicable for renewing comprehensive car insurance and not for the first-time buyer or those who take only third-party insurance.

To Conclude

You can switch from a third-party car insurance policy to a comprehensive one after getting your car inspected and paying the necessary premium amount. The upgrade to a comprehensive car insurance policy is possible at the time of insurance renewal by paying an additional premium once the inspection is approved by the insurance company.

Comprehensive car insurance is better than a third-party car insurance cover as it gives adequate coverage for losses and damages to your car and bodily injuries to yourself while the latter covers only losses to a third party.

For renewing your car insurance policy or switching third-party insurance to a comprehensive car insurance policy, get in touch with your insurance provider.

Disclaimer – The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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