A guide to choosing the right motor insurance policy and add-ons for your vehicle

Before opting for a comprehensive motor cover, evaluate the policies offered by different insurance companies based on multiple parameters like the Insured Declared Value (IDV), multiple add-ons available, inclusions and exclusions, premiums, no claim bonus, etc. While the offerings may vary from insurer to insurer, premium alone should not be the factor in choosing one insurer over other, said Kunal Jha, Head of Motor Product and Actuarial at Digit Insurance while talking to CNBC-TV18.com.

Do a little research on the customer service of the insurer and see how the entire experience of the company is—from onboarding to claims experience.

"You can also check how easy or complicated it is to buy the insurance plan or check customer reviews and ratings online. Choose a company that provides 24-hours assistance and addresses customer grievances quickly," Jha said.

Insurers are mandated by the regulator to publicly share their Claim Settlement Ratio (CSR). CSR is the percentage of claims an insurer settled out of the total claims it received during the year.

If your vehicle is damaged, you would need to take it to a garage to repair it. Insurers tie up with many garages and offer a cashless facility to the policyholders.

This means the amount would be directly settled with the garage by your insurer and you would not have to pay the entire amount upfront and claim reimbursement later. So, it might be a good idea to check the list of cashless network garages in your nearby area, Jha told CNBC-TV18.com.

A comprehensive motor insurance policy offers multiple add-ons to the policyholder. You can assess all add-ons offered by the insurer and pick the ones as per your needs.

This add-on allows the customer to receive the last complete invoice value of their car in case the vehicle is stolen or faces a total loss, i.e., damaged beyond repair.

The engine and gearbox of your vehicle under a comprehensive plan is only covered in cases of accidental damages, which means any consequential damage to the engine is not covered by the insurer.

"Taking an engine and gearbox protection add-on makes sense as replacing the car engine is very expensive and can cost up to 40 percent of the vehicle cost," Jha said.

As per Jha, insurers account for the depreciation of your car's parts and deduct the same before paying the claim. This means the cost of depreciation of the assessed parts for repair will be borne by you.

By taking a zero-depreciation cover, you can ensure that your insurer also covers the depreciation amount and pays the same.

Damage to a tyre is only covered in case of an accident. Taking a tyre protection add-on can cover tyre damages due to tyre bursts, bulges, or cuts.

In order to ensure you are not stranded due to your vehicle breaking down, taking a breakdown assistance add-on might make sense. This would ensure you are provided 24*7 assistance in case of a flat battery, or flat tyre or you need towing facility, fuel assistance, etc.

If you are someone who drives less, then some insurers may offer a PAYD cover as an add-on where a discount on premium might be offered in case the vehicle is driven less during the year (less than 15,000 km in case of Digit).

According to the Motor Vehicles Act of 1998, it is mandatory for all motor vehicles to have Third-Party (TP) insurance to ply on Indian roads. Driving a car without the mandatory TP cover is a legal offence and can attract fines between Rs 2,000-Rs 4,000 and can also lead to imprisonment of up to three months.

Vehicle repairs can be expensive. In case you meet with an accident with your uninsured car, and you do not have your own damage policy, then you would have to bear the entire repair cost. Repairs in case of significant damages can be very high.

"Having your own damage policy also protects you from any natural calamities, fire, and theft. Now let’s say you do not have the mandated Third-Party Cover either and you were in an accident that involved a third party where your vehicle caused damage to their property or vehicle or led to serious injuries or death, then you might have to bear the financial burden of any liability arising out of such legal claims. This could cause a huge financial risk as the court-awarded compensation could be very high," Jha told CNBC-TV18.com.

If you do not renew your motor insurance before 90 days of policy expiry, you may lose out on the no-claim bonus (NCB) accumulated in your previous policy. All motor insurance covers allow a discount on the premium in the subsequent year’s policy if there is no claim in the current year.

If you fail to renew the policy on time, then you could not only lose out on the NCB but also end up paying higher premiums and may be subjected to pre-inspection of the vehicle by the insurer, Kha added.