How to Pick the Right Car Insurance for Your New Car

Posted on: Dec 18, 2025 | 3 mins | Written by: HDFC ERGO Team

How to Pick the Right Car Insurance for Your New Car

The new year is a great time to treat yourself or surprise a loved one with a brand new car. If you are planning on making such a major investment, don’t forget to protect it against unforeseen damages or losses with a reliable car insurance policy.

Navigating the car insurance market may seem a bit confusing for new car buyers. In this guide, we have discussed the essential car insurance plans and must-have add-ons in India, helping you to make a confident and educated choice when searching for the best car insurance plan for your new vehicle.

Points to understand when opting for a car insurance plan for a new vehicle:

When you buy a new car in India, your car insurance choices impact your cost, coverage, and peace of mind for the next few years. Here’s what you need to know before you sign off on the policy.

1. Understanding the mandatory 3-Year third-party policy¹:

For every new private car, a 3-year third-party insurance policy is compulsory. You can buy:

a. A standalone 3-year third-party-only policy, or

b. A bundled 3+1 plan (3-year third party + 1-year Own Damage)

Most buyers choose the bundled 3+1 plan because it provides third-party protection for 3 years and OD protection for the first year, which you can renew annually. It reduces administrative work and keeps you financially protected during the car's crucial early years.

2. Understanding third-party vs own-damage vs comprehensive car insurance plans

A quick breakdown:

a. Third-Party (third party): Mandatory by the IRDAI for all vehicles. It covers the legal liability towards other cars, people and property.

b. Own Damage (OD): It covers damage to your own vehicle.

c. Comprehensive: A package combining third-party + own damage and can also have optional add-ons.

For a new car, comprehensive cover with essential add-ons usually makes the most sense because repair costs in the first few years are high.

3. Transfer your old car’s no-claim bonus to your new car:

Now, if you are changing vehicles by selling an old car and buying a new one, it makes sense to transfer the insurance policy from your old car to your new one. This is because, if you had a claim- free record on your old car, you likely earned a No Claim Bonus (NCB) of 20–50%.

Pro tip: The good news is that you can transfer this NCB to your new car, which would significantly lower the premium on your new vehicle!

How it works:

a. Sell your old car.

b. Ask your insurer for a No Calim Bonus Certificate.

c. You have 90 days from the date of sale to transfer your policy to your new car.

d. Share the certificate with your new insurer to get the discounted premium.

NCB applies only to the own-damage portion, and it meaningfully reduces your yearly premium.

4. Understanding the mandatory PA or Personal Accident Cover for your new car:

Every car owner must have a Personal Accident (PA) cover of ₹15 lakh. If you already have an active personal accident cover from another motor policy, you don’t need to repurchase it, but insurers often ask for proof.

Pro tip: Remember that the personal accident policy is specific to the owner and not the car!

Essential Car Insurance Add-ons for New Cars

This new year, new car buyers can consider getting add-ons with comprehensive car insurance to enhance their overall coverage. Here are some car insurance add-ons that are particularly useful for new cars:

1. Zero depreciation

The value of a brand-new vehicle starts to depreciate right from the moment you take it out of the showroom. Under a standard comprehensive policy, the insurer deducts the depreciated value of the damaged parts from your final claim amount. To protect against depreciation and ensure you receive the full replacement cost of the damaged part with minimal out-of-pocket expenses, invest in the zero depreciation add-on.

For more details on how this add-on is ideal for new cars, read our blog on Here’s Why You Should Invest in a Zero Depreciation Add-on for Your Brand New Car.

Pro tip: Even if this add-on increases your premium slightly, it’s worth paying because it reduces your out-of-pocket costs during a claim, especially for a brand-new vehicle!

2. Engine protection

The car’s engine is a very essential component, and it is very expensive to repair or replace, especially in brand-new vehicles. The engine protection add-on covers damage to the car’s engine and gearbox parts due to water ingress or lubricant oil leakage, which the standard plan excludes. Hence, invest in this add-on with your new car insurance plan if you want to get coverage for these components against such damages.

Pro tip: If you live in a flood-prone zone or places with long monsoons, it is inevitable that you must opt for this add-on!

3. Roadside assistance

The only feeling that your brand-new car purchase this season should bring is joy and not worry. A car breakdown in the middle of the road can leave you stranded. That’s why you should pair your holiday car insurance policy with a roadside assistance add-on to get you the necessary help during emergencies. Its assistance includes a variety of things, such as minor on-site repairs, flat tyre replacements, emergency fuel delivery, and so on.

Pro tip: If you’re not a hands-on driver and need help with things like changing a spare tyre, this add-on is a smart choice.

4. Return to invoice

Your new car is an expensive investment, and keeping it well-protected against mishaps is your responsibility. By investing in the return to invoice (RTI) add-on, you get the ability to recover the original invoice value of the vehicle in case it gets stolen or damaged beyond repair. It helps you avoid a major financial burden and lets you seamlessly replace your stolen or damaged vehicle with a new one of a similar make and model.

Pro tip: For a new vehicle, this is a must-have because it lets you claim the full invoice value without depreciation if the car is stolen or declared a total loss.

Conclusion:

Now that you know and understand the different types of car insurance plans available on the market, you can make an informed choice in picking the right coverage for your new set of wheels this time of the year. As a responsible car owner, it is your role to ensure that your vehicle is protected against all odds, and a reliable car insurance plan with practical add-ons can help you achieve that.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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