Comprehensive cover or third-party cover?

Third party insurance for your car is available at rates that are much cheaper than a comprehensive cover. But what should you ideally buy?

The answer boils down to factors such as your driving skills, the geographical boundary within which the car would operate, the traffic conditions in the city you live, external risks to your car, the value of electrical parts and other add-ons to your car, etc. If you are confident about your driving skills, or you live in an area where the driving conditions are pleasant enough, you can avoid buying a comprehensive cover and take a plain vanilla third-party insurance cover instead, thereby saving on premiums.

However, if you think you need to give yourself some time to adapt to the new car or if driving conditions are not good enough, you are better off buying a comprehensive cover. Furthermore, if you are buying a pricey car, for which maintenance, spares and repair costs are high, it is better to buy a comprehensive car insurance policy. The same holds true if there have been valuable add-ons to your car, such as high-tech security systems, high-end sound systems and upgraded interiors. High-end security systems could actually help you reduce your insurance premium in the case of a comprehensive insurance cover.

If you own a luxury car, you might also want to pick up a zero-depreciation cover, popularly known as a ‘bumper-to-bumper’ insurance cover in the industry. As the name suggests, your insurance company would pay for every damaged/lost part of your car in full without accounting for any depreciation in the car’s value in case of any claim under a zero-depreciation cover. The insurance company would also replace damaged plastic parts and damaged electrical equipments, which are not covered under a normal policy. The cover comes at a cost that is usually 25-40 per cent higher than a comprehensive cover, but this may differ on account of the accessories and add-ons in your car. Though this might add to your premiums, the cost will look tiny in comparison to the cost of replacing parts that are not normally covered by an insurance company in case you’re in a car crash as your insurer is bound to replace every single part with new ones. You might even be given a new car altogether if the cost of replacement parts is more than what a new one would cost.

The writer is Senior Vice President, Bonanza Portfolio Ltd