When looking for an extensive car insurance policy or third party insurance for your four-wheeler, you’re tempted to compare prices and select the one the most valuable. However, are you familiar with the factors that influence car insurance premiums?
The significance of car insurance coverage in India is generally understood. To be legal in India, an insurance policy must cover each new or used automobile to be legal in India. Furthermore, car insurance protects your vehicle financially in the event of theft or natural calamity. The amount you pay the insurer to purchase or renew your insurance coverage is known as the premium. Once the money is received, you are insured. This is how transactions are made in the car insurance industry.
How to Calculate the Car Insurance Premium?
The amount you pay to the insurer as part of an insurance policy’s premium is in exchange for the security and coverage of your car against any financial obligations. The Insured Declared
Worth (IDV), your car’s present value, is considered while calculating it. However, insurance providers consider more than just the car’s monetary worth. Continue reading to get aware of the variables affecting vehicle insurance rates.
Factors that Impact Car Insurance Premium
To ensure you get a fair-priced policy with enough coverage, you must be aware of the following variables influencing your car insurance price. Knowing them will enable you to make the best decision when purchasing or renewing your coverage. When consumers decide to acquire insurance, one of the initial things they check is the premium.
- Make and model of the car: One of the factors impacting your insurance premium is the model and make of your car. Generally, the insurance rate for riskier vehicles, such as sports cars, is higher than for more conventional cars. Each car model is made uniquely, and the model plays a significant role in determining how much a premium for car insurance will cost. How much you must pay for insurance premiums depends on the brand, model, and version of the car you drive.
The performance and likelihood of an automobile breaking down are also influenced by factors like engine size, peak speed, etc. In addition, the car brand (hatchback, sedan or SUV) might also be important since every design may respond to accidents differently or sustain damage unique to that form. Finally, because most car models have varied pricing for different variants, the IDV for every model may vary, affecting the premium price.
- Driving history of the car owner: The owner’s driving history often affects the cost of vehicle insurance in India. This implies the significance of a clean driving record which entitles you to lower vehicle insurance premiums. The owner’s age and driving record can impact insurance premiums. Since accidents are more common among individuals under 25, their premiums are often higher. Older drivers with good driving records pay less for insurance. Vehicle owners with a history of accidents must pay more.
- Age of the vehicle: The premium you spend for your car is significantly impacted by its age. Since insurance rates are closely correlated to the cost or IDV of your automobile, a car’s value depreciates with time. IDV, or “insured declared value,” is the value that corresponds to your car’s present market valuation. This value, which your insurer often determines, is the estimated present value of your car after subtracting its depreciation value. As time goes on and your car’s value declines as a result of depreciation, the IDV of your vehicle decreases. Thus, a new vehicle will have a larger IDV, raising the premium.
- Coverage required: The price of your insurance coverage may change depending on how well-secure your car is. Even though complete car insurance often costs more, it is still essential. Even though third-party insurance liability is compulsory, you have absolute discretion over whether to get collision coverage. Your car insurance rate will also go up if you choose extra coverage like zero-depreciation coverage, vehicle towing expenses in the case of a breakdown, increased third-party insurance liability, protecting NCB advantages, and many others. However, there is no questioning the advantage and sense of security these add-ons provide in real-time usage, even if they may increase the insurance price.
For example, if you were to get into a serious accident and your car sustained extensive damage, possessing a zero-depreciation policy would cut significantly down on your losses since most of the costs (to repair or replace both plastic and metal) would be covered. The critical thing to remember is that these riders only add a small amount to the insurance premium, so they shouldn’t be considered an extra spend but rather an investment. They provide a wide range of long-term advantages and must be included in your strategy per your needs.
- Safety features: Your overall car insurance premium can be lowered if your car is equipped with a reliable auto-locking or anti-theft mechanism. Car alerts and other anti-theft systems alert the owner in the event of a theft attempt or a breakdown (by ringing a warning, etc.). In addition, modern cars include GPS systems that make it easier to find them. Along with decreasing car insurance premiums, these safety mechanisms serve a beneficial purpose.
- Upgrades and aftermarket modifications: Despite how appealing they may be; vehicle alterations might raise the cost of your insurance. Upgrades that alter the vehicle’s handling and increase the risk of accidents include turbocharged engines and bigger wheels. In addition, leather seats or pricey paintwork eventually experience wear and tear. Therefore, it will cost more to insure a customized car than a stock one.
- Your present location: Because of the increased traffic, congested roads, etc., those living in metro areas will likely experience more significant damage. Urban regions also have higher living expenses than rural ones. This implies that car models may cost more in cities, and the cost of repairs may also be higher, which would affect your premium. For instance, accidents commonly occur in a city like Mumbai due to rising traffic, crowded roadways, etc.
Knowing what variables affect vehicle insurance costs may help you choose a plan that provides all the coverage you want at a price that works for you. Additionally, it guarantees that the value of your car is covered. Some things, like avoiding modifications to your vehicle to reduce your insurance costs, may be advantageous in the long term. Therefore, be careful to think ahead and take all reasonable steps to get comprehensive car insurance coverage instead of just third-party insurance within your means.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.