Factors That May Affect Your Car Insurance Premium
Today, In India, owning a car is not a luxury, but has instead become a necessity. When you are buying a car, you must also look for the best car insurance policy. Investing in car insurance is not just a legal obligation; it is also an excellent way to protect your finances as well as the vehicle from the damages that may occur due to an accident.
With the growing demand for car insurance policies, many insurance companies offer a variety of plans to cater to the varying needs of the people. One of the most important things that people consider while buying a car insurance policy is the premium amount.
But, do you know that the premium varies depending on a variety of factors; the insurance company consider the following factors while deciding the premium amount for your policy.
Type of car insurance you should buy
In India, all car owners must have a valid third-party insurance policy. The plan offers coverage only against the third-party liabilities, i.e., it pays for the damages caused to the third-party’s property or vehicle and their bodily injuries. The comprehensive policy, on the other hand, provides coverage against both third-party liability and self-damages. Also, you can enhance the coverage of a comprehensive policy with add-on covers. Since the third-party insurance has limited coverage, the premium for it is less as compared to a comprehensive policy.
Car’s age, model and make
Car is one of those assets whose value decreases over time. The reduction in its monetary value is known as depreciation. Thus, the older the vehicle, the lesser will be its monetary value and lesser will be its premium. Also, the car’s model and the cubic capacity (CC) of the engine, affects the premium. If you have a high-end sports car or an SUV with a higher CC, the premium will be higher than if you own a regular car.
The type of fuel used by the car affects the premium. Cars that run on CNG have a higher premium than cars that run on other types of fuel like petrol and diesel.
If you have installed any security devices in your car like car alarms, GPS systems or other anti-theft devices, it will give your vehicle additional protection from accident and theft. The anti-theft devices can be expensive but are very useful. Also, it helps you reduce your car insurance premium.
Number of claims filed
Car insurance companies reward safe drivers with discounts on the premium while they renew the policy annually. If you have not filed any claim during a policy year, the chances are high that the insurance company may offer you a discount on the premium upon renewal in the subsequent year. This discount is called NCB or No Claim Bonus. The NCB keeps increasing every year on consecutive no-claim years; the maximum discount you can get on car insurance premium renewal is 50% if you have not filed a claim for five consecutive years. If your car insurance is due for renewal, you can use the car insurance premium calculator to know the exact premium amount after discount.
For what purpose, you are using the car
You can buy a car insurance premium for both commercial and personal vehicles. If you are using the car for commercial purposes, the insurance company will charge a higher premium since you earn income through it. If you are using the car for personal use, the premium will be lower as compared to a commercial vehicle.
Gender and age too are vital factors that impact car insurance premium. It is believed that women are safe drivers compared to men. Hence, a woman between 16-25 is charged less compared to a man in the same age. Meanwhile, senior citizens are charged less than buyers who are below 50 years of age.
Another critical factor that affects the car insurance premium is your employment status and profession. For instance, if you are a self-employed professional like a doctor, you are liable to get a discount on the insurance premium. Also, most insurance companies in India offer a discount on the premium to people working in government organisations and defence forces. Some insurance companies also provide a discount to the people working in the Automobile Association.
Area of Residence
The place where you live and the area where your car is registered influences the car insurance premium. A lot of insurance companies create different insurance zones based on the risk of damage or theft in the area. If you live in an area where the risk of theft is high, expect your premium to be high.
No matter, if you are buying third-party insurance or a comprehensive policy, the insurance company will determine your premium amount based on the above factor. You should use the car insurance calculator to know the exact premium you must pay every month. Also, you must ask the insurer about the inclusions and exclusions of the policy and other terms and conditions before you sign the policy document.