5 Factors That Determine Your Car Insurance Premium
Have you ever wondered why you and your friend or colleague despite having the same car and similar parameters pay a lesser premium amount for car insurance? There are several factors that insurance companies consider while calculating the insurance premium. It is not just the make and model that affects the premium amount. Two of the most critical factors that determine the premium amount are deductibles and choice of insurance cover. Here is a list of top 5 factors that determine your Car Insurance Premium.
You geographical location
The area where you live plays a significant role in deciding the final premium amount that you need to pay. Every insurance company divides the location across the country as “Insurance Zones.” If you are living in an insurance zone with a metro city in it, you will have to pay a higher premium. The reason behind the higher premium is the exposure to the risk your vehicle possesses in the area of residence. Metro cities are associated with a higher number of accidents, thefts, and vandalism in comparison to small and less developed zones. On average, the difference between the premium amount is somewhere between 3 percent and 5 percent.
Type of insurance cover
There are two types of car insurance policies that you can buy. As per the law, it is mandatory to buy third-party car insurance to drive a car on Indian roads legally. However, it does not provide the cover for your vehicle in case of an accident or theft. Thus it is advised to go for a comprehensive car insurance plan, which will cover them both. A lot of people go for a third party insurance policy only as the premium is lesser. For example, while you pay only Rs.3200 to Rs.3500 for third party insurance of a hatchback car, the premium will cost you between Rs.10000 to Rs.15000 for a comprehensive insurance plan for the same car.
The engine type
The premium for third party insurance cover is based on the cubic capacity of the engine of your car. If you own a car with a 1000 cc engine, the third party insurance cover will be lesser compared to a car that has a 1500 cc engine.
On the other hand, the premium for your own vehicle’s damage cover is based on the Insured Declared Value of your car. IDV is the current market value of your car. When you buy a car, the first year cover applies to the retail value of the vehicle. However, as time passed by, the market value of your car decreases, which also reduced the sum assured that you could claim in case of an accident or theft. The insurance companies ask for lesser premium.
From time to time, you may add attachments to your car like music system, etc. Even the comprehensive insurance plan does not cover accessories. That means if you have installed an expensive music system, GPS, LED screens, or more in your car, the insurance policy will not cover damage in case of an accident or theft. To cover any damage or loss to these accessories, you can buy add-ons for your insurance cover by paying an additional amount. Any add-on will increase the premium cost. Please note that if the accessories are for a car’s security like a modern locking system etc. it will have a positive effect on the premium cost. In the presence of such additional security measures, the insurance company reduces the premium amount that you have to pay.
There are several add-ons available which you can buy with your insurance policy. Some of the valuable add-ons are:
- Emergency Roadside Assistance: With this add-on, the insurance company will provide roadside assistance across the country in case your vehicle breaks down. The insurance companies have tie-ups with local garages to offer these services. That means even if your car breaks down while you are using it to travel to another state, the insurance company will be able to assist.
- Personal accident cover: This add-on provides financial support in case of physical loss or disability during an accident.
- Pillion rider cover: Believe it, or not insurance policy only provides cover to the driver and not the person accompanying you on the trip. This add-on will provide cover for any emergency medical assistance to the pillion rider in case of an emergency.
Using these add-ons improves the value of your car insurance policy, but they also increase the premium amount that you have to pay every year.
There are countless benefits to getting a car insurance policy. The premium you have to pay every year is based on many factors that include your location, make and model, add-on, deductibles, and more. You should always keep in mind that you should choose the best possible policy that not only covers the mandatory requirements under the law but also provide cover for the damage to your car.