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Buying a New Car? Save on Insurance in 5 steps

Policy Litmus | 12 May, 2015  | Follow Author | Add to my Favourites 
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For most of us buying a new car is a fairly big event in our life. As is usual with us, we ask for discounts and freebies from the dealer. But there is one area where we usually do no go beyond the printed word and that is in the insurance component.

Most of us are unaware that the dealer is usually an agent for 2 or 3 motor insurance companies. This allows him to earn a commission on the policy he sells. No problems with that. However not many of us are aware that because motor insurance premiums have been de-tariffed, you may not be getting the best deal on your new car’s insurance, and end up paying substantially more. Let us explain what this means:

Insurance premiums are based on rates that have to be filed with the insurance regulator, IRDA. In the case of Health, Life and Home insurance policies, each company has a specific rate for each of their products. Every customer who purchases this policy will be charged the same premium provided he has the same profile. This is because rates are based on a tariff and no discounts are possible on these rates.

However in the case of motor insurance, rates do not have to be based on tariff plus or minus a discount. It can be completely independent of the tariff. Insurers have a leeway of discount/loading from the filed rate. Thus, although 2 customers may have the same car, they may have completely different premiums! The difference is usually in the amount of commission the company pays the distributor. Dealers are paid handsome commissions to sell a particular policy. The difference in premiums can vary from 25% to 40%.

So what should you do?

Save Up to Rs 20,000 or More:

Many people buy from the dealer because it is so much of a hassle to self-buy the policy. However the differential can be up to Rs 20,000 or more depending on the value of the new car. Here are 3 steps you must follow to avail better premiums:

1.    Find out how much the dealer has quoted you for insurance.

2.    Obtain a copy of the invoice from the dealer that shows you the ex-showroom price and the vehicle chassis and engine number.

3.    Log onto any comparison site like and check the premiums.

4.    Fill up the online application form (some companies insist on a physical proposal form).

5.    Pay the amount quoted as premium. Policies are issued almost instantly. Submit a copy to the dealer.

Remember, your car cannot be sent for registration to the RTO without a copy of the insurance policy; hence it is important to act quickly.

Save Even More:

If you are buying a replacement car, because you have sold off/are planning to sell off your existing car, you can save even more money. Your existing No-Claim-Bonus (NCB) can be transferred to your new car’s insurance policy. Your premiums will further reduce to the extent of your NCB. The procedure is quite simple.

1.    Fill up the application form and pay the premium for the new policy in the normal course.

2.    Indicate in the application form or enclose a separate letter that you will be claiming NCB from your old policy. Ensure that you attach a copy of your old policy. Make sure that your old policy is still in force.

3.    In a month or so the insurance company will provide you credit for your old NCB and remit the amount to you.

While it is possible that your existing company and the new company are different, it is less cumbersome if the old and the new company is the same.

About Policy Litmus is an Industry leading insurance comparison and industry reference site. PolicyLitmus allows you to compare the best health, home, motor and term life policy for you from over 1000 products without the need for personal contact information. Comparison not only on prices but also on servicing parameters like claim performance and customer complaints.


For more information please write in to [email protected]


Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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