Motor insurance discounts can land you in trouble

Bargaining on the cover premium can lead to lower value of your car.

We always look for discounts when we shop and especially vie for discounts when shopping for insurance. Reason: Most of us think it is a waste if we do not make a claim, as we do not get back any money.

Motor insurance is one place where it is easier to avail discounts – on account of your/driver’s profile, car model, city, age and low claim history. So, we tend to negotiate more and more here. However, it would pay to be a little careful if your bargaining skills are honoured. “This mostly happens when a policy is bought through a broker. If you negotiate very hard with the broker, he may lower the value of your car, hence lowering your insure declared value and give you a hefty discount,” says Deepak Yohannan of MyInsuranceclub.com.
 

POLICY DECISION

Want a hefty discount? 
Brokers may lower the value of your car if you negotiate hard for the best deal. However, this may land you in the soup at the time of making a claim

Eyeing no-claim bonus on renewal? 
Not disclosing previous claims to the new insurer may lead to your claim request being rejected on grounds of incomplete disclosure

Have the premiums risen?
You can still bag a good discount (as much as 40 per cent) on the back of your (driver’s) profile and car model

For instance, your car is valued at Rs 5 lakh and you are asked to pay a premium of Rs 10,000 for the policy. If you bargain with the broker, he might value your car at Rs 4 lakh, thus bringing your premium down by Rs 800-1,000.

Unfortunately, you won’t be able to know this till you make a claim. “At the time of claim, you will get a lower amount due to lesser cover for your car and lower value,” adds Yohannan. Therefore, checking with your broker about your car value may help if you land a hefty discount.

Typically, discounts on motor insurance policy depend mainly on the driver and/or owner’s profile and the car model. Another thing you need to be clear about is disclosing your claim history when changing your insurer at the time of policy renewal. “Many policyholders don’t do this, to bag lower premiums for their car. But, if you do so, the insurance company has the right to reject your claim request,” says Amarnath Ananthanarayanan, MD and CEO, Bharti AXA General Insurance. Why? Because when you make a claim with the new insurer, it contacts the previous insurance company to verify your history.

Say you had a policy with ICICI Lombard and you shifted to HDFC Ergo. And, because a zero claim history helps you strike a good deal, you do not disclose that you had made a claim with ICICI Lombard. When you make a claim with HDFC Ergo, the company will contact ICICI Lombard to verify your history. On getting to know about your previous claim, it can reject your claim on the grounds of incomplete disclosure.

Many avoid making small claims – scratch, headlight - in a year to be able to get a discount on policy renewal. This is harmless, as you did not make a claim at all. But, making one and not disclosing it could land you in trouble.

But there is a silver lining. You can get a good discount even when the car insurance rates increase. Sometimes as much as 40-50 per cent, depending on your profile and your car. Even your profession and lifestyle can affect your car insurance premium. Insurers consider those in ‘respectable’ professions to be more cautious. Like, if you are a doctor or a chartered accountant, you are likely to land a discount of five per cent, say experts.

That apart, you can also bag a discount if you have anti-theft devices installed. “Toyota Corolla comes with such a device. As a result, you get higher discounts on (easily 20-30 per cent) it. Whereas, the claim history of the Mahindra Scorpio has not been very good and so the discounts are lower (not beyond five to eight per cent), as it is mostly used for commercial purposes. The Tata Indica does not get even that much, as this is accident-prone,” said Ajay Bansal of Robinhood Insurance.

Similarly, small cars are used more by youngsters and so are considered to be more risky. On the other hand, if you are in your mid-40s or 50s and driving a Honda City, you can easily get a discount of 30-40 per cent. Also, premiums for petrol cars are less than that for diesel, say industry experts, as diesel cars are used more. The cover for a diesel car can be up to 15 per cent higher than a petrol one.