November 13th, 2018 | Updated on October 14th, 2021
It may be tempting to purchase car insurance directly from your dealer at the time of purchasing your car, but you may not realize that you are not purchasing the insurance, rather the car dealer is selling the insurance.
In effect, you are actually shelling off nearly 5000 to 8000 bucks more than what you’d have paid, had you purchased your car insurance from any other source.
This is of course not to deny that there are advantages of buying car insurance from your dealer, but then you must also keep the disadvantages into account.
Here are some pros and cons you must take into consideration while purchasing a car insurance directly from your dealer.
Advantages Of Buying Motor Insurance From A Car Dealer
Buying motor insurance from a dealer certainly saves time for a customer. This is primarily because a car dealer understands the intricacies in a policy and helps a customer in choosing the most appropriate plan. Check out the advantages of buying motor insurance from a car dealer:
- When you buy a car insurance from your dealer, you save time you would’ve spent comparing different policies available in the market.
- The process of insurance purchase through a dealer is usually smooth and more convenient than buying from other insurers.
- Car insurance by your dealer may be included in the bouquet of discounts offered at the time of purchase of your car.
- The insurance policy from your dealer cover all the risks from a car buyer perspective, and you are not required to approach an insurer for your coverage needs.
- The process at the time of insurance claims is hassle-free and easier because of efficient assistance from the dealer.
Disadvantages Of Buying Motor Insurance From A Car Dealer
No doubt, buying motor insurance from a dealer is streamlined and hassle-free and easier process. But there is a huge downside to this. Buying insurance from a car dealer has its own set of disadvantages:
- If you purchase a car insurance from your dealer, you’ve limited choice since you can pick a policy only from those insurance companies which have tie-ups with your dealer. You don’t have much options to select from a wide range of insurance policies offering extensive coverage.
- When you purchase through a car dealer, you will certainly save time but as is well known, the car dealer will certainly not offer you the best price, so you may not save money even if you save time. Car dealers get good commissions for selling insurance solutions, so you may be end up shelling off higher premiums in comparison to insurance policy purchased from the other sources.
- It is, therefore, evident that when you buy insurance from a dealer you do not have the advantage of comparing plans from different insurers.
- Dealers may include a set of additional costs for add on covers under the policy that you may not want and may not be aware of. Therefore, you need to take a closer look at the policy document provided by your dealer before sealing off the deal.
The 3 Factors To Look For Before Buying Car Insurance
Here are the 3 top factors to look for before buying car insurance for your new car.
1. Compare the Cost
If you take time to compare policy costs, you will see the huge difference between the insurance price quoted by your dealer as against the prevailing premium rate in the market. For instance, for a mid size sedan with 1.6L engine, the dealers usually charge around Rs 35,000, but the same as evident from the online research is around Rs. 26,000. When you consider a bigger sized car or SUVs with 2.2L engine, the dealer insurance is usually as high as Rs. 70,000, but is actually Rs. 45,000 in the open market.
You should flag it red when the dealer insists you to make a purchase from them because the insurance is free with the car purchase package or that you may lose your cashless claim privilege or certain aspects of warranty. Their claims may not be true and in clear violation of the Insurance Regulatory and Development Authority of India guidelines.
2. Avoid Useless Add-ons
Dealers’ insurance package often come with too many add-ons that may not be needed by you. For instance, engine protection may not be needed if you do not stay in a low lying flood prone area. Similarly, smaller segment cars may not need fancy add-ons such as key/lock replacement cover and other consumable covers for the additional costs.
The other add-ons like a Paid Driver Legal liability cover and accidental disability coverage may not be needed if you drive the car yourself instead of a paid driver and if you and your family members already have a life or accidental insurance. The unnamed passenger cover may not be needed by many insurance purchasers.
3. What About No Claim Bonus
No claim bonus or NCB is the discount on premium your insurer offers if no claim against the policy is made in the previous year that can go as high as 50% discount after five free claims. Dealers could be fooling you with the promise to NCB because it is given by your insurer even if you change your insurer and irrespective of where you purchased your insurance from.
No matter which dealer you bought your car from, the motor insurance is an altogether independent issue. When you conduct a research on motor insurance online, you may probably land up with a much better deal at a lower price than the one offered by the insurer tied up with your dealer.
If you decide to buy insurance from any other source than the dealer, all you need is to get engine and the chassis number of your car from the dealer along with the RTO under which it is to be registered. These details are sufficient to purchase a policy of your choice for your car. Next you need to share the details of your policy with the dealer to get your car eventually registered.
So the next time when you go to buy a car, don’t settle for the car insurance that your dealer offers. It may not necessarily be your best insurance product nor would it be the cheapest option. As a thumb rule, do not buy an insurance policy before comparing quotes and features of other available insurance policies in the market.
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