6 Factors That Affect Your Car Insurance Premium

The importance of car insurance policies in India is quite well-known, especially from a practical perspective. For any new or used car to be legal in India, it needs to be covered under a car insurance policy. Moreover, car insurance covers your car financially against loss due to theft or natural disasters. Apart from that knowing that your car is financially covered also brings you peace of mind.

Now, when opting to buy insurance, the premium is one of the first things people check. But, do you know the factors that determine the premium? Here goes: -

1. Insured declared value/IDV

Insured Declared Value or IDV refers to the amount that reflects the current market value of your car. Generally fixed by your insurance provider, this value is the present price estimation of your car, after deducting the depreciation value.

The IDV of your car decreases with the passage of time, with the fall in the value of your car due to depreciation. However, the higher your car’s IDV the higher the car insurance premium.

2. Car Owner Driving Record

As is the case, the cost of a premium of your car insurance has as much to do with you as with your car. The premium of car insurance in India is determined by the car owner’s driving record. This means that you enjoy better rates of car insurance premium if you have to have a good driving record.

3. Make and Model of Your Car

The class and model of your car also is one of the determinants for the car insurance premium. The premium for riskier cars such as sports cars is generally higher when compared to slower, standard ones. Cars with higher cubic capacity or those that run on gas or CNG usually have higher premiums.

4. Safety Features

Given that your car has an efficient car lock or anti-theft system installed, you may be eligible for a discount on your overall car insurance premium. Car alarms and other kinds of anti-theft devices, alert the owner (by sounding an alarm, etc.) when a theft is attempted or the car is being broken down. More advanced cars today come with GPS that helps in tracking them down.

These safety features have a very practical role to play besides lowering your car insurance premiums.

5. Coverage Required

Depending on the amount of coverage that your car requires, the premium for your car insurance could be higher or lower. Usually, opting for comprehensive car insurance will incur a higher premium, but at the same time, it is essential. And while third party coverage is mandatory, whether you purchase a collision coverage depends entirely on you. The price of your car insurance premium also increases with the add-ons that you purchase such as zero-depreciation cover, cost of vehicle towing in case of a breakdown, increased third party liability, protection of NCB benefit, and many others. While these add-ons may add to the policy premium, there’s no denying the benefit and peace of mind that these bring in real-time use.

For instance, if you were to end up in a bad accident wherein your car undergoes severe damages, having a zero depreciation cover would reduce your losses to a bare minimum, as most of the expenses (repair or replace) for both plastic and metal would be accounted for.

6. Frequency of Claims

This is another factor on which the premium of your car insurance depends. Those who haven’t made any claims throughout the annual policy year are awarded by the insurance providers with a discount on premium for the following year. This benefit is termed as NCB or No Claim Bonus.

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Other Important Factors

Apart from the mentioned factors, we have identified additional critical elements that influence the car insurance premium.

  • Engine Capacity of the Car
  • Indian or Imported Car
  • New or Old Car
  • Location of the Car
  • Driving Habits, Profession, Age
  • Accessories included in Car Insurance
  • Exclusions and Riders in Car Insurance
  • Usage Types of car

You can explore our article 7 Factors that Affect Your Car Insurance Premiums to know more in details about the factors mentioned above.

Now that you have a better idea as to what actually raises the premium of your car insurance, you can use it to make a better choice when purchasing a car insurance policy, or advice others when they intend to do the same.

While it's crucial to weigh the factors affecting your car insurance premium, the most critical step is ensuring you buy or renew your car insurance on time. Learn more about the Importance of Car Insurance Renewal on Time

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

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