How the Classification of Your Car Impacts the Insurance Policy

Posted on: Dec 21, 2022 | | Written by:

How the Classification of Your Car Impacts the Insurance Policy

Published on December 21, 2022. EST READ TIME: 4 minutes

Owning a car is something that is on the top of the list for a lot of us. Apart from fulfilling your dreams and aspirations, cars offer lots of benefits. You can visit any place and at any time, without worrying. A part of car ownership involves regular maintenance and buying a car insurance policy.

Different classes of car:

These are all the different categories of cars that manufacturers, car dealers, and insurance providers recognise.

1. Microcar

These cars are entry level cars and are ideal for people moving from two-wheelers to cars for the first time. Microcars are usually two-seaters with an engine capacity of less than 1 litre. They are the most affordable cars and so is the premium for car insurance policy.

2. Hatchback

Hatchbacks are one of the most popular cars in the country, as they are a step up from microcars and offer seating for 5 people. The price of the car is higher than microcars but quite affordable, thus a higher premium than microcars.

3. Sedan

Sedans are the next segment, which also offers seating for 5 people. However, they have a much bigger boot space, making them more practical. With premium features and more space, they cost more than hatchbacks and so does the policy premium.

4. SUV

SUV or sports utility vehicles are the most popular category in the country. They are usually designed to accommodate five to seven people and are much bigger. SUVs are ideal for long trips and the price tag is like sedans or even lesser.

5. MPV

MPVs or multipurpose vehicles are big cars that can carry even more people. There is a wide range of cars and some of them are as affordable as a top of the line hatchback. It is ideal for people with a big family.

6. Luxury Cars

These are cars from luxury brands and can be either sedans or SUVs. These cars are packed with luxury features and comfort, thereby warranting a higher price tag. And along with it a higher premium for a car insurance policy.

The need for buying insurance for your car

Buying insurance for cars is mandated by the law. The Motor Vehicles Act of 1988 made it mandatory for all vehicles to always have insurance on them. Failing to do so will attract hefty penalties and even imprisonment in some cases. According to the law, third party insurance is mandatory for all vehicles.

Third party insurance offers basic coverage against damages or injuries to other people during an accident. Since the policy offers basic coverage, the premiums are also affordable.

Factors that affect your car insurance premium:

There are quite a few things that impact the premium that you will end up paying for the car. Here are some of the major factors.

1. IDV

IDV or insured declared valueof the car is the most important factor that decides the policy premiums. The IDV of a car denotes the maximum sum insured of the car. In the event of theft or the car is damaged beyond repair, the insurance provider will pay the IDV value to the insured.

2. The fuel type of the car

The type of fuel that your car uses also impacts the insurance premium. A car that uses CNG warrants a higher premium as compared to a car that runs on petrol or diesel. Similarly, the cost of diesel cars is a bit higher than those of petrol cars, simply due to the higher cost of cars.

3. Manufacturer and model of the car

The manufacturer of your car along with the model also plays a crucial role in deciding the policy premiums. A more premium car has a higher price tag, which results in a higher premium. Similarly, the base model of a car is more affordable as compared to a top model. Thus, a top end model will warrant a higher premium for a car insurance policy.

4. Manufacturing year of the car

The year your car was manufactured is another factor that aids in deciding the policy premiums. When a car is new, it retains a higher value, thus the policy premiums are higher. On the other hand, as a car gets older, it loses its value resulting in lower policy premiums.

How insurance premiums vary for different cars?

Above are some of the factors that result in a different premium for a car. Since the above factors differ between two cars from different manufacturers, the premiums are bound to be different. However, for the same car insurance providers can offer different plans. Here is all that you need to know about it. And it largely depends on the type of policy that you choose for the car.

1. Third party liability policy

A third party liability policy is the most basic type of policy that you can opt for. The IRDAI or insurance regulatory and development authority of India is responsible for regulating all the policies in the country. The regulatory body considers quite a few factors before deciding a premium for the policy such as the number of accidents and claims made every year. And then they declare the standard premiums for cars under the following categories.

○ Cars with engine capacity of up to 1000 cc.

○ Cars with engine capacity between 1000 and 1500 cc.

○ Cars with engine capacity above 1500 cc.

The IRDAI regulates these premiums and insurance providers do not have any say in it.

2. Comprehensive insurance

A comprehensive car insurance plan offers a wide range of coverage, and it includes the benefits of a third party plan. A comprehensive plan protects your car against natural calamities such as cyclones, typhoons, earthquakes, etc. It also protects your car against man made calamities such as riots, theft, vandalism, etc. Since each insurance provider offers a slightly different variant of the product, the premiums are different as well. Some insurance providers offer free add-ons, while others offer a lower policy premium. Thus, the premium for one car will differ from different vendors.

3. Pay as you drive

Pay as you drive is a new type of insurance where you only pay a premium for the distance that you travel. Insurance companies offer different slabs which you can select based on your usage of the car. For example, 2500 kilometres, 5000 kilometres and 7500 kilometres can be three slabs. This allows users to reduce policy premiums. Also, different insurers have different slabs and benefits on offer, which change the premiums.

Conclusion

The classification of your car plays a crucial role in deciding the car insurance policy premium. In simple terms, if you choose a car that has a higher price tag, it will translate to a higher policy premium. And a car of lower value would result in a more affordable policy.

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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