If you are planning to buy a new car or own an expensive car, which is one-two years old, buying car insurance with a couple of add-ons might save you from expensive repairs in the event of total damage or theft. Traditionally, a car insurance policy insures the vehicle for a certain value, which is known as insured declared value. In case of damage to the vehicle, the insurance company pays for the damage, but only up to the insured declared value and depreciations are deducted from plastic, fibre and metal parts.

These add-ons are basically provided over the normal comprehensive motor policy on payment of extra premium. "The customer has to pay 5 per cent to 40 per cent extra premium over the normal car insurance premium to avail add-on covers, which depends on the car make and model and add-on covers chosen by the customer," said S S Gopalarathnam, managing director of Cholamandalam MS General Insurance Company.

Types of add-ons:

A motor insurance policyholder can add coverage like depreciation cover, invoice price coverage and roadside assistance services.

In zero depreciation cover, the insurer covers depreciations on plastic, fibre or metal spare parts, which needs to be repaired or replaced after an accident of the insured vehicle. "In a normal car insurance, however, they have to bear at least 10-50 per cent as depreciation cost, depending on the part being replaced or repaired. However, this add-on cover allows the customer to claim the full amount without any reduction towards depreciation," said Vijay Kumar, head of motor insurance at Bajaj Allianz General Insurance Company.

Costs involved:

The first year premium for instance of an Delhi registered Alto from HDFC Ergo, which covers depreciation and roadside assistance, will cost Rs 11,975, compared with a regular car insurance from the same insurer, which costs Rs 9,146. The difference in premium is more prominent in higher- segment cars. For instance, premium for Skoda Laura insurance with the same add-ons will cost Rs 39,650, while the simple policy will cost Rs 30,707.

Moreover, as the car gets older, the difference in premium between a simple policy and an add-on policy keeps on increasing. For the same Skoda Laura, the difference between a simple policy and an add-on policy will be almost 52 per cent at the time of third year policy renewal. The simple policy will be available for Rs 21,075, while the policy with add-on will cost Rs 31,969.

Roadside assistance service provided by insurers are very similar to those provided by car dealers. "Although, the charges for this add-on are similar to those provided by car dealers, the main difference is that insurers provide an alternate vehicle and arrange for accommodation in case of need," added Kumar.

Another add-on that is suitable for new vehicles is invoice price insurance. In this, the insurer pays the value of a new car in case the vehicle is stolen or damaged completely. "In such cases, a traditional car policyholder gets only the insured declared value, which depreciates every year and, hence, the amount of insurance payment will be considerably lower than its replacement value. However, if the policyholder has an invoice cover, the cover will pay the value of a new car of similar make and model," said Ajay Bimbhet, managing director of Royal Sundaram Alliance Insurance Company.

The premium for a car insurance policy with invoice cover from Royal Sundaram for an Alto will be Rs 8,808, while the simple policy will cost Rs 8,627. For Skoda Laura, the policy with invoice cover add-on will cost Rs 53,695, while the simple policy will cost Rs 52,635. Since the difference in premium is not much and the add-on provides coverage in case of theft or total damage, it is suitable for those who have bought a new car or have an expensive car.

Generally, these covers are available from insurers for vehicles up to three years old and, therefore, are not beneficial for those who own older vehicles. "As the car becomes older, it is more prone to accidents and damage, therefore, these add-ons are provided for new and two-three-years-old vehicles," said Karan Chopra, head of retail business of HDFC Ergo General Insurance.

One size does not fit all:

It is not necessary that everybody may have same requirements. For instance, roadside assistance is useful for people who travel out of town often and are at the risk of getting stuck in remote areas where no garage or service station are available, while invoice cover is useful for people who are at higher risk of their vehicle being stolen.

Therefore, it is necessary to understand the specific needs and then compare various options available from different insurers before opting for a motor insurance add-on cover.