Estimated Reading Time: 10-15 minutes (2,473 words)

Introduction

Car insurance in India is mandatory — but millions of policyholders still lose money, face claim rejections, or end up overpaying for premiums simply because they make avoidable, common mistakes. Despite rising awareness, many drivers still treat insurance as a formality rather than a financial safety tool, leading to gaps that show up only during an accident or claim.

According to IRDAI consumer grievance reports, claim rejections continue to be one of the highest-reported complaints every year. Industry advisories further reveal that most of these rejections stem from documentation errors, incorrect IDV selection, undisclosed modifications, lapses in renewal, or buying the wrong type of policy altogether. Even small mistakes — like missing an add-on or not reading exclusions — can cost policyholders thousands of rupees.

In this guide, we break down the Top 5 Car Insurance Mistakes Indians Make, share real-world examples from everyday drivers, and provide clear, step-by-step fixes to help you lower premiums, avoid disputes, and ensure your car is genuinely protected when you need it the most.

Key Stats & Quick Facts (India-Focused)

India Motor Insurance Insights (based on industry reports, IRDAI data & insurer advisories):

• India’s motor insurance market is projected to grow at ~13% CAGR through 2033 (IMARC) — driven by rising car ownership, increased digital adoption, and stricter enforcement of third-party insurance rules across states.
  
• 30–40% of Indian car owners choose an IDV lower than the recommended range, usually to reduce premiums. However, this leads to significantly lower payouts during theft, total loss, or constructive total loss claims, resulting in out-of-pocket expenses that can run into lakhs.
  
• Nearly 50 lakh motor insurance policies lapse every year, largely due to missed renewal reminders, change of address, or lack of awareness about grace periods. Once lapsed, insurers may mandate a physical inspection and charge higher premiums — and coverage remains inactive until renewal is completed.
  
• 40–60% of claim rejections in India occur due to non-disclosure, inaccurate information, or documentation gaps, according to insurer grievance reports. Common triggers include undisclosed modifications, incorrect NCB declarations, invalid driving licences, and missing FIRs or repair invoices.
  
• Claim settlement speeds are improving, thanks to AI-based damage assessment tools, video inspections, and digital claim uploads. However, insurers consistently remind customers that the burden of accurate documentation, timely reporting, and truthful disclosures still lies with the policyholder.
  

Top 5 Car Insurance Mistakes Indians Make (and How to Fix Them)

Mistake #1: Choosing the Wrong IDV (Insured Declared Value)

What happens

Many Indian car owners intentionally reduce their IDV to get a cheaper premium — but this directly reduces the claim payout during total loss, theft, or constructive total loss situations. A lower IDV saves a few hundred or thousand rupees today but can cost lakhs during a major claim.

Example

Rohit valued his brand-new ₹12 lakh car at an IDV of ₹9 lakh to save ₹1,800 on premium.
A year later, his car was declared a total loss after an accident.
His payout? ₹9 lakh instead of ₹12 lakh, because the insurer only pays the declared IDV.

• Savings: ₹1,800
  
• Loss during claim: ₹3,00,000+
  

This is the most common financial mistake made by first-time buyers and online aggregator shoppers.

Why it happens

• Lack of understanding of depreciation slabs and how IDV is calculated
  
• Agents offering “cheapest premium” quotes to close rapid sales
  
• Users purchasing policies in a hurry on aggregator apps without checking custom IDV options
  
• Misconception that IDV “doesn’t matter unless the car is stolen”
  

How to Fix It (Step-by-Step)

• Check the manufacturer-recommended IDV range or market resale value.
  
• Avoid picking an IDV that is too low just to reduce premium — it reduces financial protection massively.
  
• For cars under five years old, always choose an IDV as close to real market value as possible.
  
• Use an IDV calculator (great lead magnet opportunity for your blog).
  
• Pro tip: For new cars, combine proper IDV with Zero Depreciation Add-On to get maximum claim value.
  

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Mistake #2: Letting the Policy Lapse

What happens

A lapsed policy means the car is completely uninsured, exposing the owner to both legal penalties and financial losses. A lapse results in:

• No legal third-party cover (punishable under Motor Vehicles Act)
  
• Loss of accumulated No Claim Bonus (20–50%)
  
• Higher premium due to break-in insurance
  
• Mandatory vehicle inspection before renewal
  
• No coverage during the lapsed period — even if an accident happens within those days
  

Example

Priya accumulated a 35% NCB over 3 years.
She forgot to renew her policy on time and lost it entirely.
Her next-year premium shot up by ₹4,800 — all because of a missed renewal date.

Why policies lapse

• No SMS/email reminders from insurer
  
• Relying entirely on agents who forget to follow up
  
• Change of phone number or email address
  
• “I’m not using the car these days” attitude
  
• Belief that a small lapse doesn’t matter
  
• Ignoring grace periods
  

How to Fix It

• Set 3 renewal reminders: 7 days before, 3 days before, and on renewal day.
  
• Use insurer or bank auto-renewal features when available.
  
• Renew online — instant payment, zero paperwork, immediate policy.
  
• If the policy has already lapsed:
  
  • Renew within 90 days to retain NCB.
    
  • After 90 days, NCB resets to 0%, and inspection is mandatory.
    

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Mistake #3: Not Buying the Right Add-Ons

Most common missing add-ons in India

• Zero Depreciation (essential for cars under 5 years)
  
• Engine Protect (critical in flood-prone areas — covers hydrostatic lock)
  
• Return-to-Invoice (RTI)
  
• Consumables Cover (covers engine oil, nuts, bolts, AC gas, etc.)
  
• Roadside Assistance (RSA)
  

Real Story

During severe Mumbai monsoon floods, thousands of vehicles suffered engine damage due to water ingress.
Most of those claims were rejected, because engine damage due to waterlogging is not covered unless the owner has purchased the Engine Protect Add-On.

This is one of India’s costliest insurance mistakes.

Why people skip add-ons

• Belief that add-ons are “upsells meant to increase premium”
  
• Fear of higher annual cost
  
• No awareness of what each add-on actually covers
  
• Relying fully on generic online comparisons
  

Fix

• Choose add-ons based on:
  
  • Car age
    
  • City & climate risks
    
  • Daily driving distances
    
• For metro cities (Mumbai, Chennai, Bengaluru, Delhi):
  
  • Zero-Dep + Engine Protect + RSA are highly recommended.
    
• For cars older than 7 years:
  
  • Zero-Dep usually isn’t available — pick Consumables Cover + Standard Comprehensive Coverage instead.
    

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Mistake #4: Not Disclosing Drivers or Modifications

Non-disclosure = claim denial (legal grounds)

Indian insurers can completely reject claims if the owner fails to disclose changes in risk profile.

Common non-disclosure issues

• The regular driver is not the policyholder
  
• Car being used for commercial or ride-sharing (Uber/Ola)
  
• Performance or cosmetic modifications (alloys, exhaust, remaps)
  
• Aftermarket CNG/LPG kit installed but not endorsed in the RC & policy
  

Example

Rahil installed an aftermarket CNG kit to save fuel costs but did not declare it to the insurer.
A fire incident later damaged the car, but the insurer rejected the entire claim due to non-disclosure of risk modification.

This is legally valid under IRDAI rules.

Fix

• Always list all regular drivers, especially if young or newly licensed.
  
• Declare all mechanical/electrical modifications, including CNG kits.
  
• Declare commercial usage (Uber/Ola/Freight).
  
• Update policy immediately when adding/eliminating a driver or accessory.
  

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Mistake #5: Claim Errors (Late Intimation, Missing Documents, Wrong Procedures)

Most common claim-related mistakes

• Calling the local mechanic before informing the insurer
  
• Driving the car after the accident (invalidates certain claims)
  
• Delayed intimation (beyond the 24–48 hour deadline in many policies)
  
• Not filing an FIR when required
  
• No photos or videos from the accident scene
  
• Missing repair bills/invoices
  
• Not submitting DL, RC, or policy copy on time
  

Why claims get rejected

Insurers rely on timely evidence to verify the claim.
Delayed reporting, tampering with the vehicle, or incomplete information is treated as a breach of policy conditions, giving insurers legal grounds to decline the claim.

How to Fix

• Immediately inform the insurer through app, helpline, or website — record the claim number.
  
• Take photos/videos of:
  
  • Damage to your car
    
  • The accident location
    
  • The other vehicle and its number plate
    
• File FIR if:
  
  • There is third-party injury/property damage
    
  • Theft
    
  • Serious accidents
    
• Do not repair the car until the surveyor inspects it.
  
• Upload all documents digitally — most insurers now accept claims via mobile apps.

Quick Comparison Table — Mistake vs. Financial Impact vs. Fix

Mistake	Financial Impact (Typical Range)	How to Fix (Actionable Steps)
Wrong IDV	Lower settlement in case of total loss or theft, typically ₹50,000 – ₹5,00,000 depending on car value and depreciation.	– Check manufacturer-recommended IDV or market value.- Avoid reducing IDV to save a few hundred rupees.- Use an IDV calculator to determine optimal coverage.- Combine with Zero-Dep Add-On for new cars.
Lapsed Policy	Loss of No Claim Bonus (20–50%), legal risk for driving uninsured, higher renewal premiums (₹3,000–₹10,000 extra) and possible inspection charges.	– Set 3 renewal reminders (7 days, 3 days, day of expiry).- Use auto-renewal options from insurers.- Renew online instantly.- If already lapsed, renew within 90 days to retain NCB, else inspection + higher premium applies.
Missing Add-Ons	Out-of-pocket repair costs can range ₹10,000–₹2,00,000 for engine/flood damage, parts replacement, or roadside assistance emergencies.	– Buy add-ons based on car age, city, and risk exposure.- Metro cities: Zero-Dep, Engine Protect, Roadside Assistance are essential.- Cars >7 years: pick Consumables Cover + Standard Comprehensive.- Regularly review add-on relevance each year.
Non-Disclosure	Claim rejection or partial claim payout, potentially total financial loss if insurer refuses coverage.	– Declare all regular drivers, especially young or newly licensed.- Declare all modifications, aftermarket kits, or CNG/LPG conversions.- Disclose commercial use like Uber/Ola.- Update policy immediately when any risk factor changes.
Claim Errors	Delays in settlement, partial payment, or outright denial; financial impact varies from ₹5,000–₹1,50,000+ depending on repair and documentation issues.	– Immediately inform insurer via app/helpline.- Take photos/videos of accident, damage, and location.- File FIR for theft, third-party injury, or serious accidents.- Do not repair car before surveyor inspection.- Upload all documents digitally to avoid delays.

FAQs Section

Summary

• Wrong IDV = biggest financial loss.
  
• Lapsed policies = loss of NCB + legal risk.
  
• Add-ons are not expensive; they protect your claim.
  
• Non-disclosure is the #1 cause of claim rejection.
  
• Claim mistakes are preventable with awareness.

Conclusion

Car insurance is more than a legal requirement in India — it’s a critical financial safety net. Yet, millions of policyholders continue to make avoidable mistakes that lead to reduced claim payouts, higher premiums, or outright claim rejections. From choosing the wrong IDV, letting policies lapse, skipping essential add-ons, failing to disclose drivers or modifications, to errors during the claim process, each mistake carries significant financial risk.

By understanding these common pitfalls and taking proactive steps — such as selecting the correct IDV, renewing on time, opting for the right add-ons, maintaining full disclosure, and following proper claim procedures — car owners can protect their investment, maximize payouts, and enjoy peace of mind on the road. For Indian drivers, awareness and diligence are the keys to making insurance work effectively rather than being a source of stress.

References & Sources

• IMARC Research – India Car Insurance Market Forecast
  
• IRDAI Circulars & Motor Insurance Guidelines (2024 Updates)
  
• SIAM Vehicle Sales Reports 2024–2025
  
• Insurer advisories: Acko, ICICI Lombard, Digit, HDFC Ergo
  
• Economic Times Auto Reports on Flood Claims & Engine Damage
  

(You can link each reference on your site individually.)