Will Your Location Affect Your Car Insurance Premium? Know More

Posted on: Aug 4, 2023 | | Written by:

Will Your Location Affect Your Car Insurance Premium? Know More

Published on August 03, 2023. EST READ TIME: 3 minutes

The whiff of a new car is hard to miss. It will stay with you for a while until you use a strong car perfume. Adding a car to your garage can bring a host of benefits. Right from the convenience of being able to travel to any place and at any time to saving time and money. You also get the freedom to take road trips and not always rely on public transport or cabs, which can be a bit patchy at times. A crucial aspect of buying a new car is a car insurance policy.

Since a new car can be a considerable investment, it is in your best interest to safeguard it with a good car insurance policy. The law requires you to buy third party car insurance at the minimum, however, it is advisable that you opt for a more rounded coverage with a comprehensive plan. When you want to buy a car insurance policy, it might be prudent to know the different parameters which can affect its policy premium.

Factors that affect car insurance policy premiums based on your location

Here are a few parameters that can impact the policy premiums and these are dependent on your location.

1. Population

The number of people residing in your locality or city can play a crucial role in determining the car insurance premium. Any place that has a higher population, has a higher chance of being populous with vehicles. And as the number of vehicles on the road increases, so does the risk of meeting with an accident or incident. It is one of the reasons why the cost of premium is higher in a tier-1 city as compared to a tier-2 or tier-3 city.

2. Market competition

Another factor that can decide the car insurance premium of your car is the local insurance market scenario. The cost of premium can at times depend on the locality. If the insurance providers in the locality offer a different premium due to competition, you might benefit from it.

3. Crime

The number of crimes in your locality is another important factor in deciding the car insurance premium. Any area that has a higher crime rate, translates to a more risk-prone area for insurance companies. It can bump up the policy premiums by a small margin since the chance of your car being involved in a crime is high. A car can either be subject to theft, burglary or even vandalism in such areas.

4. Infrastructure

Insurance companies also consider the infrastructure such as roads and lighting of areas before concluding on car insurance premium. An area that has bad lighting or bad road conditions, poses higher risks to cars since it increases the probability of a car being involved in an accident. If you live in an area that has bad infrastructure, it will increase the policy premiums.

5. Climate

One might wonder how climate can impact the car insurance premium. However, it does have a direct correlation. Any place that is known to have harsh climatic conditions directly increases the risk for car owners. For example, if your city is known for heavy rainfall or snow, it will translate to a higher risk. Thus, insurance providers ask for a slightly higher premium of customers living in areas with extreme weather conditions.

6. Rules and regulations

The rules, regulations and laws in your locality might affect the car insurance premiums at times. For example, if a state has a different minimum coverage, you must adhere to that. Depending on the mandated coverage, the policy premium can vary a bit.

Reasons that make car Insurance a must-have

Now that you are aware of the different parameters that can influence policy premiums, here are some reasons that make owning a policy a must-have.

1. Law

The Motor Vehicles Act of 1988 governs all vehicle-related laws and it states that car owners must have valid third party car insurance on them always. Failing to do so will result in hefty penalties for the owner, as per the recent amendments to the act. It is also a major reason to get a policy.

2. Protection against accidents

Irrespective of how carefully one drives, one can still get involved in an accident. An autorickshaw can rear-end your vehicle or a biker can brush against the door during peak hour traffic. In either case, the owner might not be at fault, yet must bear the expenses. Not unless the car is covered with adequate insurance. A policy can protect your car and your finances in such unforeseen circumstances.

3. Third party liability

On the other hand, in a lot of accidents, other individuals or vehicles can be damaged by your car. For occurrences, a third party liability policy can turn out to be a lifesaver. The policy will not only cover expenses related to repair or hospitalisation but also help you in legal matters.

4. Add-ons

Car enthusiasts, who feel that a standard policy might not offer adequate coverage, can rely on add-ons. As the name suggests, these are additional features that you can plug into the policy by paying a small premium, thus increasing the car insurance premium.

5. Natural calamities

Given the increase in natural calamities across the country and globe, in general, a car insurance policy is a must. A comprehensive plan will protect your car against losses related to natural calamities such as cyclones, typhoons, earthquakes, etc.

Conclusion

A Car insurance premium is usually a leading factor for car owners to decide which policy to proceed with. If you are looking for a policy, above are some factors that can lead to higher or lower premiums. Knowing these factors will help you determine if you are being charged appropriately or not.

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

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