Choosing the Right Car Insurance for Luxury Cars in India

Section 146 of the Motor Vehicles Act, 1988, states that all the motor vehicles on Indian roads should be insured for third-party liability. Breaking this rule can lead to punishment under Section 196 of the Act. You may face 3 months' imprisonment or a fine of ₹2,000 for the first offence.

Renewing third party car insurance coverage for luxury vehicles is crucial. This helps avoid legal offences.

Apart from third-party cover, the Act also mandates basic Personal Accident Cover for car owners and drivers. Luxury car owners should comply with these regulations. Failure to comply or a lapse in a third-party policy can cause significant damage. If a policy lapse lasts 1 day, the vehicle will need to be inspected. If comprehensive car insurance lapses for over 90 days, you lose the No Claim Bonus benefits.

Luxury cars in India have distinct insurance needs compared to regular vehicles. Below are some key factors for choosing car insurance for luxury cars:

1. High Vehicle Value and IDV

The on-road prices for luxury cars are very high. Hence, their IDV (Insured Declared Value) will also be high. This IDV sets the sum insured for damages. Insurance premiums increase for high IDV vehicles. Insuring a luxury vehicle costs more than insuring a standard or entry- level car.

Pro Tip: It is advisable to set IDV approximately equal to the market value. This helps to avoid underinsurance. IRDAI states that the IDV can be equal to the current market value after depreciation. Therefore, for a new luxury car, the IDV may equal the invoice price. Get a higher IDV to qualify for a higher premium and avoid the risk of being underinsured.

2. Costly Repairs and Parts

A minor repair for a luxury car can cost more than for a regular car. Luxury cars require OEM parts and expertise. Using standard parts or generic services may affect the vehicle's warranty. The minor repairs for luxury cars can generate huge bills. A standard policy with lower IDV may not cover these damages.

Pro Tip: Car owners should be aware of the insured value. If the insured value is lower, the claim will be settled at the depreciated value. This may often be less than the repair costs. Thus, the vehicle owner stands at a loss here. Contact insurer-approved workshops for cashless repairs and faster claim settlement. They provide genuine parts while maintaining car value. If you're paying out of pocket, store all invoices for easy claim settlement.

3. Vehicle Age

New cars have higher IDV. Therefore, new car owners need to pay higher own damage car insurance premiums. As the car ages, the insurance company applies standard depreciation rates. This reduces the IDV and, eventually, the OD premium.

Pro Tip: Luxury car owners with older vehicles may get very low IDVs. Therefore, if you own an extremely old vehicle, filing for a claim will be less profitable.

4. No Claim Bonus

No claim bonus benefits are applicable for claim-free years. This reduces the OD premium. Luxury car owners can gain significant premium discounts with No Claim Bonus. The benefits include:

◦ 20% for one claim-free year

◦ Maximum of up to 50% for 5+ claim-free year

Pro Tip: Filing for one minor claim in the policy year can lead to loss of No Claim Bonus. Hence, it is advisable to opt for a No Claim Bonus add-on cover. It keeps your NCB discounts intact up to a limited number of claims in the policy year.

5. Past Claim History

If your luxury car has a history of theft and accidents, your insurance premium will be high. As the vehicle owner, if you also made a claim earlier, the insurance company will consider that.

Pro Tip: A clean record with NCB benefits can help reduce premiums. You can avail significant discounts from the insurer. However, if you file for multiple claims, the premium costs will be higher.

To know more about luxury car insurance, read our blog, All You Need to Know About Luxury Car Insurance.

Add-ons and extra coverage also increase luxury car insurance premiums. These add-ons enhance the protection compared to standard policies. The key add-ons to consider for luxury cars are as follows:

1. Zero Depreciation

Zero depreciation cover means the car’s depreciation won’t impact your claim. Luxury cars have various expensive parts, such as panels, bumpers, and lights. Zero depreciation add-on cover means you get the full cost of parts for repair or replacement when you make a claim.

2. NCB Cover

No Claim Bonus protection cover in car insurance protects your NCB benefits accrued to date. Retaining NCB benefits is extremely important for luxury car owners. It helps to save future premiums from becoming expensive.

3. Return to Invoice

You're paying a significant amount to buy these luxury cars. If it gets stolen or is beyond repair, it can result in great financial loss. However, with Return-to-invoice cover, you save your amount. In cases of theft or when the car is beyond repair, the insurer pays the car's original invoice value. It is an essential cover for the first few years of ownership.

4. Engine Protection

Luxury cars have high-quality engines. The engine protection cover add-on includes scenarios which your standard policy may not cover. This can help car owners avoid expensive engine repair costs. The engine protection cover in luxury car insurance includes repairs for:

◦ Water damage

◦ Mechanical issues

◦ Oil leaks

Opting for these add-ons for your luxury car insurance makes it more valuable. Therefore, you can stay protected against unwanted, expensive repairs.