8 factors that define your car insurance premium

Car insurance shopping can be a difficult service to navigate if you do not know what to look for or have not fully anticipated the costs involved.

By Vinod Gill

Car insurance in India is a mandatory requirement under the Motor Vehicle Act of 1988. However, the type of car insurance a car owner chooses to avail is entirely up to them. The law requires car owners to undertake basic insurance that protects against third party liability. Nonetheless, it is prudent to take out a comprehensive car insurance policy that covers third-party damages and own damages that may be caused to the car on account of the vehicle owner.

Car insurance shopping can be a difficult service to navigate if you do not know what to look for or have not fully anticipated the costs involved. Before you proceed to buy car insurance and upgrade to a comprehensive policy, here are a few points you should keep in mind.

  1. The Make and Model of Your Car Matters

No doubt, an expensive car will command higher insurance premiums. Foreign, luxury cars may be more powerful and more resilient to the small wear and tear, however in the event, there is an accident or mishap that causes damage to the car, the expenses rack up. Insurers will take into consideration that certain parts of a particular model may not be easily available in India or may require expert servicing that comes at a price. The premium on a luxury car will cost more than the insurance premium on a less expensive model that is produced in India.

  1. Age of the Car

The age of the car will determine the depreciation and current market value of the vehicle. The higher the depreciation, the lower the car’s market value and the lower the premium on the car insurance. Older cars have lower insurance premiums than newer ones as they are worth a lot less than new cars.

  1. Region of Insurance

Where you insure the car is a determinant of the cost of insurance premiums. What this means is if you insure your car in a metro city in India, the insurer assumes that the wear and tear and scope for accidents will be a lot higher than in semi-urban areas. Theft, punctures, and minor accidents are also less likely in these regions; hence insurance premiums reduce for car owners operating vehicles in these parts.

  1. Type of Insurance Coverage Sought

If a car owner seeks coverage that includes own damages in addition to third party liability coverage, the insurance premium amounts will increase. According to the law, third party liability coverage is mandatory for all vehicle owners. But a good insurance policy is one that covers all manner of injury and damage to the car regardless of what or who caused it.

  1. No Claim Bonus

No Claim Bonus or NCB is a benefit that accrues to policyholders that do not raise any claims for a given policy year. The bonus is available at the time of renewal when the policyholder gets a discount on the insurance premium payable. NCB can reduce the premium liability over time but will be capped at a certain percentage point. The NCB is applicable on the own damages component of the insurance premium.

  1. Add ons

Add-on features such as automatic renewals, NCB protectors, roadside assistance, etc., are chargeable over and above the insurance premium payable. These add-ons offer a host of benefits, but it is wise to choose only those that are relevant to your vehicle and car usage.

  1. Anti-Theft Device Installation

Installing an anti-theft device that has been certified by the Automotive Research Association of India will reduce the amount of insurance premium on your car. While all insurers may not offer this discount, it goes a long way in keeping your car safe as well.

  1. Voluntary Deductibles

Predetermined expenses you choose to pay out of pocket for any claims made to the insurer are deductible from the insurance premium you owe the insurer.

Conclusion

Asking the right questions and having some idea about the costs attached with a good car insurance scheme will enable you to find a quality policy at a good price. Another exercise that can help prepare you is using a car insurance calculator.

Using the car insurance calculator, you can input the information detailed above and generate a quotation on the premium that you would have to pay based on various parameters. A car insurance premium calculator enables you to anticipate the premium amount you can expect to pay the insurer for the coverage of a plan of your choosing. Use the car insurance premium calculator today if you plan on buying car insurance any time soon.

(The author is a writer who specializes in writing content on Insurance and Finance subjects. He is a Digital Marketing Consultant, Blogger, and Co-Founder of Ecompany. Views expressed are personal and not necessarily that of Financial Express Online.)

Leave a Comment