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-   -   Insurance premiums vs claims - Would 'Self Insurance' be cheaper for you? (https://www.team-bhp.com/forum/indian-car-loans-insurance/161306-insurance-premiums-vs-claims-would-self-insurance-cheaper-you-2.html)

I have a theory that after the first three years of comprehensive insurance, self insurance works best for the remaining life of your car.

The main reason being the depreciation of parts, and of course the law of averages. Currently, all the 6 of my vehicles are self-insured.

And, I like warranties, but then, as far as its concerned with my cars, I don't like relying completely on the showroom guys to set everything right. Yes, they have undeniably more expertise, most importantly proper tools, but, some times its cheaper, better and more satisfying if you sort the problems out yourself. (Ofcourse this implies that you have the time)

Since I have an imported car, it almost makes no sense to buy comprehensive insurance because the insurance company will definitely back out on some pretext or other when it comes to claim processing. In all my years of driving and owning cars, I never had to claim insurance and in the end, I think airbags, ABS, traction control and maintaining the right tyre pressure make more sense than paying hefty premiums.

I doubt any answer is strictly right or wrong in this context; it would depend on the type of car, usage and driving environment.

Self-insurance would probably make much more sense if it was easy and convenient to have the offender's insurance take care of damage to your car (in case it's the other person's fault). It seems to work well in the US since the police and insurance companies enforce it effectively. Once your car gets old, it would make sense to not have comprehensive insurance: if you're at fault, suck it up; if someone else is, that's take care of.

There is no comprehensive insurance available for vehicles older than 7 years (or something in that whereabouts).
Self Insurance / 3rd party is the only option available then.

What does one do?

I think it finally depends on each persons thought process - is it worth the gamble to save money in the long run with the risk of losing big or not?

From my experience I have never made a claim for small damages to my car. But two years back I had a flood in my basement which Total loss'ed all five of my cars. In that case the payout was much larger than the premium I had paid on those cars.

So even though most of the time I would definitely save with self insurance, the comprehensive is just to protect from the chance of the unknown.

I will definitely take vehicle insurance - just for the piece of mind.

But If had a taxi rental business with 100 + vehicles, then I will do a cost benefit analysis before insuring every one of them.

Its simple, an average person has enough to worry already with mounting work pressures and time crunched personal life. It doesn't make sense for me to keep worrying about potential expenses that may mount up. On the other hand if taking this decision could result in immediate and significant saving then I will be ready to live with the uncertainty which is not the case for most individual car owners.

Also, At an individual level, an accident / loss may happen anytime and decisions made on averages or cost -benefit analysis will not give optimum returns. If all car owners would move to self-insurance, then sure on an average they may be better off but at an individual level there will still be 'loosers' which is what every one tries to avoid.

I would like to bring a new angle to this discussion -
Is it better to 'self-insure' cheap cars (read alto, nano, etc) which have a less chance of being stolen? The only other risk would then be a 'total loss accident'.

OT: Most of the buses of Kerala State Road Transport Corporation run without insurance. They have found it cheaper to settle claims themselves, than to insure all the buses !

I guess the don't have to pay for the folks they manage to kill too as a result of reckless driving and poor maintenance.

Insuring a KeralaSRTC bus is also a sure shot way to bring down the shutters for the insurer.

This is a misnomer Alpha1.
I had comprehensive 0 dep insurance in the 9th yr of ownership of my Maruti Suzuki Zen.(I even shared the scanned copy of the policy on the insurance thread on TBhp).
The private insurance companies and their agents spread rumors about such self-created rules to maintain high profitability.
On the other hand, the govt run insurance companies are well compliant.
We recently lost the chance for comprehensive insurance(and the benefit of 50% NCB) on my grandfather's 18 year old Maruti 800 because we forgot to renew the insurance on time.
Lapse in the comprehensive insurance meant that the company was not ready to re-issue the comprehensive policy we have for 17-ish years.

Regards

I don't believe so.

I can tell you that we have no problem with the overpriced repairs because the insurance company is taking care of it.

When my brother side-swiped the Civic into a 5-Series, the damage could easily have been repaired for 10K or less at an independent + competent garage. But I have insurance, so I won't bother what the Honda dealership charges. Today's dealers only 'replace', they don't 'repair'.

I don't think you'll ever be in that situation as, if you take a loan, the financing company insists that you comprehensively insure your car.

I don't understand why it should be a problem for imports. As it is, there are so many CBUs in our country which have no problem with insurance. Heck, any car costing over 20 lakhs is majorly imported in itself.

:thumbs up Very good point, thanks!

I think it's 10 years or something. No one refused to comprehensively insure my Jeep after the whereabouts of a decade.

Well, with a cheap car, the difference between comprehensive & 3rd party insurance will be so little that you won't bother :D

Considering India - I think 3rd party is the best. We can make up for our own losses but we cannot really trust a thrid party's claim to be honest here. I am being pessimistic but then if you ever have a friend or neighbour who has been a victim of such accident, you'll know what I mean.

IMHO

1) Deep pockets, many cars, good drivers (owner/driver) - go for TP/Self (these stuff too included/implied - access to personal mechanic, body shop, paint shop, back up car, car over 2 years old)

2) Salaried, big house mortgage and kids school, etc - (hehe) - Comprehensive preferred. FEAR OF UNKNOWN lingers here

3) Beginner drivers, men and women both included - Comprehensive

4) Rust buckets, 7+ year old timers, jeeps, collectibles, sentimental buys (1st salary) old bikes - self/TP.

Hope this helps.

EDIT - My cars Vs Claims

1) NEW Alto - 5 years owned - comp all 5, 1 minor running board bender - paid out of pocket
2) NEW Indigo CS - 3 years - comp all 3 - ran over a boulder 60K bill to insurance, I had to pay 8K for the claim
3) NEW Nano - 2 years - comp all 2 - windshield Vs coconut! - paid some 500Rs odd for claim
4) 20 year old Jeep - 3+ years - all 3 were TP
5) 15 year old Armada - 2 years - all TP
6) NEW Chevy Sail UVA - 1 year (current car) - Zero Dep Comp (fear of expensive parts)

This is why insurance premiums are getting higher for retail consumers. The commercial vehicles/fleet operators go for third party only.And they lobby hard to keep premiums down. The insurance companies loose money by insuring commercial/fleets. They make it up by charging more from retail. Alas there is no entity to lobby for retail owners interests.

Hence there is no favourable protocol to settle claims for retail consumers. Getting third party settlement from insurance companies is a big legal hassle. So most claims are settled by the damaged cars' insurance even if it wasn't his fault.

I agree with this totally. For my other cars like the Honda city ( now sold) and the Toyota Innova which do have the luxury of a 0% depreciation cover, I don't go to the OEM body shops for fixing dents etc, however big they are. But it is rather all done at the FNGs at a fraction of the cost.

But for more serious damages that extends beyond the body panels, I would personally be still reluctant to go to FNGs and would rather go to an OEM even with there jacked up prices.

You can think of this issue from risk management perspective.

You buy insurance to hedge "risk" by definition. For example I buy health insurance to protect myself from the risk of unforeseen disease infections like Swine flu, personal accidents etc

The risk can't be completed eliminated but the downside is limited after buying insurance.

You can eliminate non systematic risk by following traffic rules, taking good care of the car, always driving wisely etc. But you can't eliminate systematic risk like someone banging into my car, theft etc

So I think one should always buy full car insurance irrespective of the state of the car as the IDV would be always greater than insurance premium by a substantial amount.

And financial crises have always shown estimations from historical data prove disastrous at some point of time! (I didn't claim or meet an accident in last 20 years is a historical data which is used to say I don't need full insurance!)

P.S. Sorry for financial jargon stupid: