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Everything You've Ever Wanted to Know about Car Model and Car Insurance Premium

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It takes a lot of time, energy, and research in zeroing in on the car make and model you want to buy. But, despite making that hard choice, you may feel your car is no different from the hundred others parked in the lot. So, you may decide to add a few features that you know will make your four-wheeler stand out. Yes, it will draw the attention of on-lookers, but it will also increase your car insurance premium. Surprised? Well, in that case, read on to learn the many factors that influence your car insurance premium.

What is Make and Model of a Car?

A car's 'make' is its manufacturer or brand, such as Maruti Suzuki, Hyundai, Honda, TATA Motors, so and so forth. However, on the other hand, the term 'model' refers to a specific product manufactured by the automaker. The models are usually distinguished by name and/or initials, i.e. Toyota Prius or BMW X5. Once you add the model year to the make and model, you have the complete name, i.e. BMW (make) X5 (model) 2021 (year of manufacture).

How does Make and Model Affect the Premium of Car Insurance Policy?

A car's make and model is one of the most significant factors affecting insurance premiums. You might often find that the insurance policy of a certain model costs way more or less than another model. And, usually, the difference in premium is due to the following factors:

• Engine Capacity: The engine capacity plays a significant role in deciding car insurance policy premium. If the engine's cubic capacity is high, the premium would automatically increase, and vice versa.

• Vehicle's Age: A new vehicle often requires you to avail better coverage. It is because in case the car is damaged, the cost involved in its repair would be higher initially than at a later stage. The margin of consideration when determining the insurance premium thus increases with an increase in age and decreases if the car is newly bought.

• Fuel Type: CNG cars often require costly maintenance when compared to petrol-run or diesel-run cars. Thus, in case of any damage to a CNG-run vehicle, the cost involved in maintenance and repair would be higher than in other fuel-based vehicles, hence increasing the premium cost.

• Vehicle Cost: The value of your vehicle impacts the car insurance policy premium. This is because of two reasons: First, expensive cars are equipped with expensive car parts. In case of damage, the cost of repairing or replacing them will be higher. Thus, insurers charge higher car insurance premiums. Secondly, expensive cars are prone to theft, and thus the insurance company will have to pay more to replace the vehicle.

Other Factors Affecting the Premium Amount of Car Insurance Policy

To calculate car insurance premium, the insurance provider also considers the following factors.

1. IDV: Insured's Declared Value or IDV is the amount obtained after deducting depreciation from the car's current market price. It is also the assured amount the insurance provider agrees to cap the claims during the policy tenure. A high IDV means increased risk to the insurer in case of damage, and hence, invites higher premium payments.

2. Your residence location: The vehicle owner's location or where the car is registered also determines the premium amount for car insurance policies. Premiums are usually high in urban areas with high population density. It is because for such locations, the chance of traffic congestion, and thus the risk of accidents, increases.

3. Driving efficiency: If you are an experienced driver with a record of trouble-free driving for years, you might just secure a car insurance policy at a low premium. Records of accidents or such incidents can increase the probability of future damage, thus pushing up the premium value. Efficient driving with zero cases of accidents is also rewarded with a No Claim Bonus or NCB in case of zero claims during the policy period.

4. Deductibles involved: Deductibles are agreed amounts that an insured person would need to pay as a percentage of the claim amount. In case deductibles are high, the premium amount is reduced.

5. Type of cover selected: You can usually find two car insurance types in the market, including third-party liability covers (made mandatory by the Government of India) and comprehensive covers. Third-party covers are usually available at reasonable premium values. For comprehensive covers, the premium cost varies with the insurance provider selected and add-ons chosen.

Key Takeaway

Whether you are buying a new car or it is time for car insurance renewal, keep your budget in mind at all times. The goal should be to strike a balance between the features you need in your car and how much you can comfortably afford to pay in insurance premiums. Buying car insurance online is always the smart move as it allows you to compare various car insurance policies and make an informed decision.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by:

S. Gopalakrishnan | Motor Insurance Expert | 40+ years of experience in insurance industry

A veteran in insurance industry. S. Gopalakrishnan is a name to reckon with in the field of reinsurance, he has headed the Reinsurance department and has rich experience in other fields of motor insurance. He loves to share his opinion on latest topics in the insurance industry and how he can help people in safeguarding their assets using insurance products.

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Few Other Articles:

• Know how your car type affects the car insurance premium

• Brand-new or pre-owned - Your car decides the insurance you should get

• Confused between Sedan & SUV? Let your car insurance premium decide the David vs. Goliath battle

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