But new add-on plans with motor insurance policies may draw higher premiums

More and more insurance companies are introducing solutions for motor policyholders. Since the Insurance Regulatory and Development Authority forbids any change in the basic product - the motor insurance policy - insurance companies are innovating with add-ons that provide cover for various other contingencies.

"The regulator allows two insurance companies to charge different premiums for the same car, based on their claim experience with the model. However, all insurance companies need to follow the same policy wording, leaving little scope for an innovative cover," says Gaurav Garg, managing director and CEO, Tata AIG General Insurance, while explaining the rationale of launching products with add-ons.

Among the insurance companies selling add-on covers, Bharti AXA General Insurance recently launched a cover that reimburses the total cost of a car, including the taxes paid, in case of theft or accident. The car owner can also opt for accidentrelated add-on covers such as the reimbursement of hospital and medical expenses. Tata AIG General Insurance offers eight add-on covers, including those against depreciation, reimbursement of the invoice value for total loss or theft, for emergency transport and hotel expenses when a vehicle breaks down, and for an accident.

Bajaj Allianz General Insurance has an add-on that covers depreciation, engine damage due to water ingression, or the leakage of lubricating oil because of an accident, and round-the-clock assistance in cases of accident or breakdown.

Royal Sundaram General Insurance, HDFC Ergo and Future Generali have addon covers, too. "Some of the add-ons, like zero depreciation, are essential to a vehicle owner and help save a good amount of money," says a certified financial planner. However, some companies do not give a choice to their customers to pick the combination of addons they want. All insurers bundle add-ons themselves, and sell these in one plan that makes the total insurance premium high.

For example, Bajaj Allianz General Insurance's plan, branded as Drive Assure, offers a combination of three add-ons. The total premium for a Honda City 1.5 V MT is Rs. 44,365, including standard policy and addons. This is 28 per cent higher than the premium of `34,665 minus Drive Assure. Some insurance companies are also selective about providing add-ons. For example, ICICI Lombard General Insurance does not have depreciation and invoice value cover for Tata Indica and Hyundai i10.

While there are more than nine addon covers available, here are three important ones:

Zero depreciation

If you opt for a zero-depreciation cover, you can claim the entire billed amount from the insurer on parts that need to be changed. However, they may restrict the claims to each policy period. For example, Tata AIG General Insurance restricts the claims to amaximum of two each per policy year. A person can avail of this cover only for the first four years. Bharti AXA, Tata AIG General Insurance and HDFC Ergo sell this cover without bundling.

For a Hyundai i10 Magna 1.2 model, the policy along with depreciation comes to Rs. 14,788 in the first year from Bharti AXA General Insurance. For the Honda City 1.5 V MT model, the owner needs to shell out Rs. 27,808 in the first year.

Invoice value

What happens if a car is damaged beyond repair or is stolen? If a person suffers such a mishap in the first policy year, the insurance company will pay 95 per cent of the showroom price, excluding registration and taxes. Reimbursement in cases of theft and total loss keeps falling with depreciation of the car. This add-on comes handy in such situations. If you have this cover, the insurance company will reimburse not only the showroom cost, but also the taxes and duties.

To buy a cover (invoice value and standard policy) for a Honda City 1.5 V MT model from Bharti AXA General Insurance, the owner needs to pay Rs. 28,268 in the first year. For a Hyundai i10 Magna 1.2 model, the cost comes to Rs. 14,223 in the first year.

Cover for accident

Bharti AXA General Insurance covers the car owner for medical aid, in case of an accident. For a premium of Rs. 275 each year, the company provides medical expenses of up to Rs. 10,000, a daily hospital expense of Rs. 1,000 and ambulance charges of Rs. 5,000.

Source : Business Standard