Buying a car or bike is often one of the milestone purchases people make. The focus is usually on the price, the model, the delivery date.
Somewhere in that process, insurance quietly becomes just another item on the bill. It is bundled into the “on-road price”, explained briefly, and rarely questioned.
But that is where many buyers end up paying more than they should, or worse, buying a policy that does not fully protect them.
At the time of delivery, most buyers are told that insurance is part of the process. In some cases, they are even made to feel that buying insurance from the dealer is necessary to avoid future issues with claims or servicing.
But this is not true.
Saurabh Vijayvergia, founder and CEO, CoverSure, said this largely comes down to how insurance is sold at the point of purchase. “Most buyers rely on the dealer’s guidance during a high-value purchase, while insurance quietly becomes a commission-led add-on within an OEM–broker ecosystem.”
In simple terms, insurance is often treated as a product to be sold, not a decision to be made.
The biggest reason is commercial.
Dealers earn commissions on insurance policies sold through their network. Since buyers are already in the process of making a large purchase, insurance becomes an easy add-on.
Vijayvergia explained that this creates a clear information gap. “A buyer may be quoted an on-road price of Rs 10 lakh, which includes an insurance premium of Rs 45,000. A similar policy in the open market could cost Rs 30,000–Rs 35,000 or offer better coverage, but the difference is often masked with ‘free’ add-ons like accessories.”
This makes it difficult for buyers to compare or question the policy.
The scale of the issue is also visible in data. The Insurance Regulatory and Development Authority of India’s (IRDAI) Annual Report 2024–25 noted a 14.3% rise in complaints under unfair business practices, which includes mis-selling at the point of sale.
One of the most common ways this works is by making the premium look attractive upfront.
Vijayvergia said dealers often use “premium compression” tactics. This means reducing the visible cost, but weakening the policy in ways that only become clear later.
A common example is lowering the Insured Declared Value (IDV), which is the maximum amount you can claim if the vehicle is stolen or completely damaged. A lower IDV reduces the premium slightly, but can cut the claim amount by Rs 50,000 to Rs 1 lakh or more.
Another tactic is adding high voluntary deductibles. This reduces the premium by a small amount today, but increases what you have to pay out of pocket during a claim.
In some cases, important add-ons like engine protection or consumables cover are removed to keep the price low.
“These tactics create the illusion of a cheaper policy while shifting more risk to the customer,” Vijayvergia said.
The real problem often shows up at the time of claim.
Buyers assume they are fully covered because they purchased insurance along with the vehicle. But the actual policy may not include key protections.
Vijayvergia said this gap between expectation and reality is a major reason behind complaints. “Buyers may be told certain protections are included, while critical covers like engine protection, especially relevant during monsoons, are either missing or not clearly explained.”
As a result, customers end up paying out of pocket for damages they thought were covered.
This becomes even more significant given the size of the market. Motor insurance accounts for around 30–32% of the general insurance industry’s premium, as per IRDAI data.
Despite what many buyers are told, the answer is no.
Motor insurance is mandatory under law, but buying it from the dealer is not.
Vijayvergia said, “Motor insurance is not mandatory to purchase from the dealer. Buying insurance independently allows customers to compare multiple insurers and choose coverage that fits their needs.”
Shilpa Arora, co-founder and COO, Insurance Samadhan, echoed this. She said many dealers push insurance due to commissions and sales targets, but customers are free to choose any insurer.
“You do not have to buy from the dealer or stick to your old insurer,” she said.
One of the most important things many buyers miss is the No Claim Bonus (NCB).
Arora explained that NCB belongs to the policyholder, not the vehicle. This means if you have not made a claim on your previous vehicle, you can carry forward that benefit to your new policy.
“This can lead to a 20% to 50% discount on the own-damage premium,” she said.
However, this is often not discussed at the dealership. Buyers are neither asked about their previous policy nor informed about how to transfer their NCB.
As a result, they end up paying a higher premium than necessary.
The most common mistake is rushing through the insurance decision.
At the time of delivery, buyers are focused on getting the vehicle home. Insurance is seen as a formality rather than a financial decision.
Vijayvergia said many buyers assume that purchasing insurance from the dealer is necessary for warranty or smooth claims, which is not the case.
In reality, insurance is portable, and claims depend on the insurer’s network and policy terms, not the dealer.
A few simple steps can help avoid costly mistakes.
Take a few minutes to compare policies online. Check the IDV carefully instead of focusing only on the premium. Ask clearly what add-ons are included. If you already own a vehicle, make sure your No Claim Bonus is carried forward.
Most importantly, do not feel pressured to buy insurance immediately at the dealership.
Insurance is meant to protect you when something goes wrong. But when bought in a hurry, it can end up doing the opposite.
People spend lakhs on buying a car or bike, but often spend just a few minutes deciding on insurance. And that is where a small decision today can turn into a much bigger cost tomorrow.