8 Factors that Affect Your Car Insurance Premium

Posted on: Mar 4, 2022 | | Written by:

8 Factors that Affect Your Car Insurance Premium

Published on March 3, 2022. EST READ TIME: 3 minutes

Although car insurance is compulsory, that simply does not imply that you need to burn a hole in your pocket every time you do it. If you care for certain factors from the very beginning, you can complete the deal with optimum coverage at an affordable cost. That is how you can enjoy maximum benefits without paying extra charges.

What is Insurance Premium in Car Insurance?

The car insurance premium is the interest that you pay to the insurance company for purchasing or renewing your vehicle’s policy. You can instantly get an idea about the premium value as you enter the relevant details on the online car insurance premium calculator.

The premium is the price you pay the insurance for the protection they offer to you and your vehicle. Hence, the larger the coverage, the higher the premium. The premium of a third-party plan is fixed, but since a comprehensive car plan is customisable, the insurance premium depends on the type of customisation you have on your policy.

Factors that affect car insurance premium:

1. Car model:

The make and model of the concerned vehicle is a major determinant of the premium value. A sedan car’s premium will be significantly higher than a hatchback. This happens because the basic composition of the vehicle alters due to the change of make, variant and model. Your car’s manufacturer, cubic capacity of the engine, type, and all these factors directly impact the insurance premium value.

2. Age of the vehicle:

The age of the concerned vehicle is an important factor in determining the insurance premium value. Age implies two very critical factors: IDV and depreciation. The older the vehicle, the more the depreciation. These two factors are interrelated.

IDV implies the current market value of that particular vehicle, and depreciation means the loss of value to normal usage and natural wear and tear. Therefore, an older car will experience enhanced depreciation and lesser IDV. This means that the insurance premium of a brand-new car will be comparatively higher than an old vehicle.

3. Area of coverage:

The area or location of the concerned vehicle plays an active role in determining the insurance premium value. The premium value of a tier III metro city will definitely be higher when compared to that of a small town. Moreover, all insurance companies maintain certain specific zones that are considered accident-prone. Insurance is either denied for such locations or comes with a higher interest.

4. Type of coverage:

There are two kinds of insurance: the basic third-party policy and the comprehensive policy. The third-party policy is mandatory for all vehicles, and it covers the loss or damage to a third person in case of an accident that involves your vehicle.

However, a comprehensive care plan will take care of both the third party and your vehicle. Therefore, the premium value of a comprehensive plan will undoubtedly be higher than a third-party plan.

5. Add-ons:

Add-ons or riders are special benefits offered by almost all insurance companies, and they come at an extra cost. These benefits are exclusively applicable to comprehensive plans. The more riders you add to your existing plan, the higher the premium you have to pay. But, it is best to ensure optimum security, if you are maintaining a luxurious vehicle.

Some of these add-ons include Zero Depreciation, Passenger coverage, etc. It is highly helpful, especially in the long run. But you must ensure that you carefully choose only those riders that you feel to be absolutely essential for your purposes, as too many of them will cost you unnecessarily.

6. No Claim Bonus:

During car insurance renewal, almost all the insurance companies offer a special discount called No Claim Bonus for raising no claim during the previous policy term.

Before raising a claim, make sure that the NCB clause applies or not. If it is applicable, compare the results well to ensure which option is financially more viable. This way you can gain optimum benefit from your existing policy plan.

7. Theft prevention device availability:

You can ensure complete protection of your endearing vehicle by installing an anti-theft prevention device approved by the Automotive Research Association of India. You may experience a special premium discount for this. It comes as a two-way benefit for your car.

8. Voluntary deductibles:

You can choose a voluntary deductible option for reducing your CAR INSURANCE premium policy. This implies that you need to contribute an already prefixed amount to the concerned claim amount. This means that the chosen insurance company needs to pay a lesser amount during claim settlement and charges a comparatively lesser premium value. The online car insurance premium calculator will reveal the truth.

How to Calculate Insurance Premiums for my Car?

These days, it is very easy to calculate the premium of a car insurance policy. You can use a simple online tool called the car insurance premium calculator and get to know what your premium liability will be. This tool is available on the website of every motor insurance company. It is also available on all insurance aggregator websites. It is a quick and easy tool that gives accurate results.

FAQs

• Is a third-party plan enough for an old car?

This depends on how you use the vehicle. If it is your main vehicle and you use it extensively and regularly, you need to get a comprehensive insurance plan. If however, you seldom use the vehicle and plan to replace it soon, a third-party plan may be enough.

• How to know which rider is best suited for me?

Not all riders are suitable for you. Understand what cover each rider offers and only choose the most important ones for yourself. Remember, too many riders will unnecessarily push up the premium of your motor insurance policy.

• Why is the premium of an online car plan lower than that of an offline plan?

This is because you don't pay any brokerage on the online plans. Also, since most of the work is automated, you save on the administrative and processing fees.

• Would I get a isn't on the premium if I buy long-term car insurance?

You pay the premium upfront in a long-term plan. This protects you from inflation and so, you do end up making some handsome savings on the car insurance premium in the long run.

Conclusion

This is a comprehensive guide to ensure optimum coverage for your vehicle, keeping your budget in mind. Your online CAR INSURANCE PREMIUM CALCULATOR will reveal the exact amount you have to pay for buying or renewing your car insurance plan.

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

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