Understanding car insurance can be a bit complex for beginners. To start with, it is necessary to know a few terminologies used by the industry. Explained below are the basics about car insurance that would help you to make a wise purchase decision:
1) Policy coverage:
Car insurance policies are of 2 types – third party insurance and comprehensive policy. The coverage and the benefits of both these insurance policies are different. Third-party insurance is mandatory as per Saudi law and covers only third-party liability such as property damage, death or injury to a third party. Whereas a comprehensive policy also provides compensation against any damages to your own car due to any unanticipated accident, theft, natural calamities, etc. A comprehensive policy isn’t mandatory as per law but provides extensive coverage to your car as well as covers third party liability.
2) Premium and Sum Insured:
Both these terms premium and sum insured would seem a lot similar, but they are 2 different aspects of the car insurance policy. A premium is a price you pay to your insurer on your car insurance policy in exchange for the coverage they provide for any damages to your car or a third party. The price of the premium can be reduced by accepting different discount offers from your insurance company. The sum insured of the car is the current market value of the insured car. Sum insured is calculated basis the ex -showroom price of the vehicle minus the depreciation value of the car over the years. If your car is stolen or is completely damaged and is beyond any repair, then the car is deemed as “total loss”. In such a situation, your insurance company compensates your loss by paying you the approximate sum insured amount. The sum insured is set during the purchase of your car insurance. Setting a higher sum insured leads to a higher premium, while a lower sum insured reduces the claim amount. sum insured is only determined in case you opt for a comprehensive insurance policy.
3) Understanding Deductibles:
Deductibles are a part of the claim amount that the policyholder pays to the insurance company. You can choose the amount you are willing to pay during a claim settlement. While choosing a higher deductible is beneficial for safe drivers, it also reduces the claim amount paid by the insurance company.
4) No-claim discount (NCD)
It is important to understand the no-claim discount as this is one of the factors that reduce your premium. No claim discount is a discount that is given on your policy renewal premium for not making any claim during the year. Moreover, not making any claim for consecutive 5 years can reduce the premium up to 50%.
5) Add-ons on an insurance policy:
If you plan to opt for a comprehensive insurance policy, you will have the option to choose add-ons, i.e. additional coverage, along with the policy. You can choose among a wide range of add-ons such as personal accidents, depreciation clause, hire car facility, roadside assistance, geographical extension, etc. These add-ons increase the cost of your policy and need to be purchased separately. Hence, it is prudent to choose your add-ons depending upon your need to avoid an unnecessary increase in the insurance policy price.
Understanding these basic aspects of a car insurance policy will help you to purchase a more economical car insurance policy. Walaa Insurance offers member ship discounts with Mazaya Walaa.