Don’t buy car insurance from the dealer
If you are in the market for a new car, the dealer usually bundles an insurance policy as part of the deal. But we give you one good reason to not settle for the policy your dealer offers: it can be expensive.
Read on to understand why you should shop around for a better rate.
WHY DO YOU PAY MORE AT THE DEALER?
For the insurer, a car dealer is best placed to sell vehicle insurance. Remember thirdparty insurance cover— which insures you against damage to a third person or property due to your car—is mandatory, whereas owndamage cover insures your vehicle against theft or damage and is recommended. The dealer typically sells a comprehensive policy consisting of these two covers.
Given the mandatory nature of third-party cover and the fact that it’s simpler for the dealer to sell the policy, the market practice has been to compensate dealers for the sale, even if they are not licensed insurance distributors. Payouts are often passed on as infrastructure and marketing expenses.
“Car manufacturers, especially the big companies, run insurance programmes where they tie up with the insurer and dictate aspects such as servicing and claims apart from premiums and payouts that get passed on to the dealers in the form of various expenses,” said Mahavir Chopra, director-health, life and strategic initiatives, Coverfox.com. “While some manufacturers will enrol an insurance intermediary, others negotiate directly with the insurer. The mark-up on the policy gets passed on to the dealers who probably make more money through the sale of insurance than they do through selling cars.”
Also insurers tend to overpay. “The overall payment to dealers or insurance intermediates who have a tie-up with dealers or manufacturers can be as high as 40%. For the customer this means they pay a higher premium than if they had bought the insurance elsewhere,” said Kapil Mehta, co-founder, SecureNow Insurance Broker.
WHAT SHOULD YOU DO?
Start by asking the price of insurance cover. The next step is to go online and compare policies at portals such as RenewBuy.com, Myinsuranceclub.com, Policybazaar.com, Coverfox.com and Securenow.in that you can use to compare premiums.
Remember you may not get a better rate from the same insurer, but you can shop around for a cheaper policy. “Insurers have tie-ups with car manufacturers that dictate the price of insurance. This becomes the market rate for that car. However, an insurer who doesn’t have a tie-up may offer a much cheaper rate for the same benefits,” said Mehta.
“Once you get the basic car details and invoice from the dealer go online and shop. You need to key in details such as model name, variant and year of manufacturing and accordingly the insurer will calculate the premium,” said Chopra. “After you decide on a plan, you can buy the policy by giving personal details and those of your car such as chassis number and engine number that are available in the invoice. The policy will be emailed to you; you need to send a copy to your dealer who will get the car registered and you can then take your car out for a spin.”