You cannot escape from a car insurance policy. It is a legal requirement and every year you are required to renew your car insurance policy to legally drive your car on Indian roads.
When it comes to insurance, we all have preconceived notions or scepticism that lead us to believe in different myths. Car insurance is not different.
Since it is mandatory, and since we don’t want to spend too much money, we look for the cheapest car insurance policy in the market. 
It is a myth that the cheapest car insurance policy would also be the best.
Just like all myths, this too has a reality. Your car insurance premium is ultimately a factor of what you exactly from the coverage options. Your necessity should determine your choice of car insurance, no matter how costly it may sound.
Following are the factors that affect your car insurance premium and make cheap car insurance a ‘myth’:
- The coverage
Two kinds of coverages are available in the market. Third party cover is mandatory and covers damages caused to any third party or property by your car. The other is the comprehensive cover which, other than covering third party liability, also covers damages caused to your own car and the owner/driver. Premiums for third party cover are the cheapest and fixed by IRDA while comprehensive cover entails higher premiums.
Different cars with different MMV have different premiums based on their market value and their engine capacity. . By that logic your neighbor’s Maruti Alto and your Mercedes Benz cannot have the same premiums.
- The Insured Declared Value (IDV)
IDV is the maximum value up to which your car would be covered, in case of total loss. This value represents the market value of your car minus the applicable depreciation. Higher IDVs result in higher premiums and vice versa. However, you need to make sure that you choose the optimum IDV and not something that is lower just because you intend to play lower premium.
- Add-on covers
Add-ons are additional riders which increase the scope of coverage of your car insurance plan. Some common add-ons include zero depreciation cover, engine protect, collision cover, road-side assistance, etc. Inclusion of any add-on results in a higher premium. You need to assess the ones you need from the ones that you don’t, to ensure that you’re not paying unnecessarily higher premiums.
- No Claim Bonus (NCB)
When you do not make a claim in any policy year, you get a NCB in the subsequent year. This NCB is cumulative and is offered as premium discounts in the subsequent year. So, NCBs reduce the premium outgo of your insurance policy.
So, these features determine the premium for your car insurance policy.
For the car insurance policy that is cheapest for you, you can buy only a third party cover or a comprehensive plan which has the lowest IDV and is devoid of any add-on covers.
But, would the cheapest car insurance policy be better too? Let me demystify the truth.
Myth:You should buy the cheapest car insurance plan
Reality:Buying the cheapest plan is relative
What might be cheap for you might not be cheap for another individual. For instance, the cheapest premium for your luxury car would not be the cheapest for the owner of a budget car. Since premium depends on the MMV of the vehicle, the cheapest premium would vary across different models and cars.
Myth:Cheapest premium can be achieved through third party coverage only.
Reality:What about the coverage for your own damages?
Though the third party coverage is legally enough, don’t you need coverage against the losses faced by you for the damage that may happen to your car? A comprehensive policy is better, as it covers damage happened to your car in case of accident, in this respect even if the premium is higher.
Myth:The premium should be considered, not the IDV.
Reality: IDV is important.
The IDV reflects your vehicle’s value which would be paid in case your car is lost or damaged beyond repairs. A lower IDV, though saves premiums, undervalues your car. Thus, in case of loss of irrevocable damage, you stand to lose if you opt for a low IDV.
Myth:Add-on covers unnecessarily increase the premium.
Reality:Add-ons are important as they work as a safety net.
Did you know that the damage to your engine due to water logging or floods is not covered by your plan? The engine protect add-on is important in this instance.
What if your car breaks down in the middle of the road? The roadside assistance rider ensures you service in this regard.
Add-ons are important and should be included to increase the scope of coverage of your car insurance plan. Though the premiums increase slightly, add-ons are financially rewarding at times of claims.
The bottom line
The cheapest car insurance policy is a myth.
While buying car insurance, you should ensure availing the maximum coverage rather than running after the premium. The premium should be weighed in on the basis of coverage and not of the basis of being the cheapest.
In times of claims, the cheapest policy might actually burn your pockets with their low coverage.
So, part with a little extra premium today to ensure wider coverage and protection for your finances tomorrow.