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Get quotes from other insurers and do a comparative analysis (Mint)
Get quotes from other insurers and do a comparative analysis (Mint)

Get quotes from other insurers and do a comparative analysis

The premium on car insurance on own damage tends to decrease annually if there are no claims. In the case of no claims, you accrue a no-claim bonus. This increases as a percentage every year. Despite these factors, if your premium increases, then you should seek quotes from other insurers

My car is four years old but well maintained. I have never claimed my car insurance. However, I have noticed that every year, the premium increases slightly. Why is that so? On what basis are the premiums calculated?

—Sanjay Singh

Car insurance premium has two broad sections, i.e., own damage and third-party liability. Usually, premium on car insurance on own damage tends to decrease annually if there are no claims. This is because of two factors. First, the insured declared value (IDV) comes down each year. This is the total sum assured of the policy. With age, depreciation increases, bringing the IDV down. Because of this, the gross premium gets lowered.

Second, in the case of no claims, you accrue a no-claim bonus. This increases as a percentage every year. No-claim bonus is applied as a discount to the gross premium. As a result, the premium payable becomes lower.

Despite these factors, if your premium increases, then you should seek quotes from other insurers, and do a comparative analysis. The basic product in motor insurance is the same across all insurers.

The third-party liability premium is fixed for a car across all insurers. This gets revised from time to time. In general, it has been on the increase. This is also mandatory for all car owners to buy. If the premium increase is primarily driven by third-party liability premium, then you have limited recourse.

We are a family of four. I have two sons aged 10 and 19 years old. Two months ago, my wife, elder son and I contracted coronavirus. We didn’t need hospitalization at that time. Now, I plan to buy a policy for my family. Will insurance companies be reluctant to give me the policy?

—Anish Mathews

A few insurers have now explicitly started asking if the proposer or their immediate family members had contracted covid-19. This does not mean automatic rejection of the proposal. Also, since your case seems to be a mild one, the insurer’s reluctance is likely to be low. Also, not all insurers have an explicit question about covid-19. So, the chances of issuance will be much higher with them.

Separately, since your elder son is now 19, you can buy an independent policy for him instead of adding him to the family floater. This will allow him to maintain an independent sum assured, and later add dependents. Underwriting guidelines for young adults are generally more liberal as well.

Abhishek Bondia is principal officer and managing director, SecureNow.in. Queries and views at mintmoney@livemint.com

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