Buying a new car is one of the most emotionally charged purchases an Indian household makes. The excitement of the delivery day, the pressure to complete paperwork quickly and the reassurance offered by the dealership create a sense that everything must be finished in one go.
Insurance is often introduced very early in the process, positioned as a convenient part of the overall purchase. In the rush to simplify decisions, buyers may not always get the opportunity to evaluate whether the coverage on offer is truly adequate for a new car owner.
In that moment, many sign off on the dealer’s insurance quote without realising that this hurried choice can affect both their costs and coverage for years to come.
Car insurance is not an accessory. It is a regulated financial product that determines how well your vehicle and your finances are protected. Treating it as an afterthought is where many consumers lose value.
Convenience that inflates the premium
Dealer insurance is sold on the promise of convenience. One invoice, instant documentation and no additional effort. What is rarely explained is pricing.
Dealer-sold policies typically include commissions built into the premium. These costs do not enhance coverage or improve claims service. They simply raise the price.
When buyers compare calmly, they often find that the same insurer offers lower premiums online for similar or better coverage. Since motor insurance renews annually, starting with a higher premium also impacts future renewals. What seems like a small difference in year one can add up meaningfully over five or seven years of ownership.
One-size-fits-all coverage limits your options
Most dealers sell a one year own damage policy bundled with three years of third party cover. While this meets regulatory requirements, it offers limited flexibility.
Online, customers increasingly choose longer-term structures such as three years of own damage plus three years of third party cover, often at a price that is close to, or sometimes lower than, the dealer’s one plus three bundle.
The difference matters. Longer-term own damage cover means fewer renewals, protection against annual price increases and more certainty. Yet many buyers are never told these options exist because dealership offerings are restricted to a narrow set of products.
Fewer insurers mean weaker comparisons
Dealers typically have tie-ups with a limited number of insurers, and recommendations are driven by commercial arrangements rather than suitability. Motor insurance policies may look similar on the surface, but details such as zero depreciation, engine protection, return to invoice, and roadside assistance vary widely in scope and exclusions.
Online platforms allow customers to compare these features side by side, along with insurer claim processes and garage networks. A city commuter may prioritise cashless repairs and quick approvals, while a highway driver may value engine protection and roadside assistance. Independent and unbiased comparison makes it easier to match coverage with real driving behaviour.
Claims are between you and the insurer
Many buyers assume dealer insurance guarantees smoother claims. In reality, the insurance contract is always between the customer and the insurer. While dealers may help coordinate claims initially, this support is not guaranteed over the long term, especially if the customer relocates or changes service centres.
Online insurers and platforms increasingly offer app-based claims intimation, digital tracking and dedicated claims support. During stressful moments such as accidents, clarity on whom to contact and how the claim progresses matters far more than where the policy was purchased.
You are free to choose, and most forget that
Regulations clearly allow consumers to buy insurance from any insurer of their choice. A dealer cannot legally insist on selling insurance as a condition for vehicle delivery or registration. With digital issuance now standard, a compliant motor insurance policy can be issued online within minutes, without delaying delivery.
None of this means dealer insurance is always the wrong choice. It simply should not be an automatic one made under pressure. As car ownership grows and insurance becomes a recurring household expense, informed choices matter. Buying a car can be emotional. Buying car insurance should be rational. For a growing number of consumers, that rational decision begins online.
Paras Pasricha is head — motor insurance, Policybazaar.com