If you are planning to buy car insurance and comparing various policies online, the wide range of estimated premiums offered by different insurers for different plans can take you by surprise. That’s because there are a lot of factors that can affect car insurance premium rates.
In order to make an informed decision on your car insurance policy, it is important to understand what factors determine car insurance premiums. This would help you assess whether the premium you are being asked to pay is justified or not.
So, here’s a detailed analysis on what affects your car insurance rates:
What factors affect car insurance rates?
-- Type of coverage
There are broadly two types of car insurance policies available in India – third-party liability-only insurance (that covers any financial liabilities to a third party in case of an accident) and comprehensive car insurance (that covers both the insured vehicle as well as the third party). Now, comprehensive car insurance policies would always ask for a higher premium than third-party insurance policies as the benefits and coverage offered by the former are much higher.
-- Registration city
If your car is registered in an urban area or a metropolitan city, then you might have to pay a higher premium as compared to what you would have paid if your car was registered in a tier-II or tier-III city. That’s because the chances of road accidents and thefts are comparatively higher in cities than in smaller towns.
-- Make and model of the car
The make and model of your car determine your vehicle’s Insured Declared Value (IDV) and, hence, its premium rate.
IDV is essentially the current market value of a car. It is calculated by taking into account the car manufacturer’s listed selling price and depreciation based on the vehicle’s age.
The IDV of a car acts as the sum insured of your policy as that is the maximum amount your insurer would pay in case of total damage to the car or theft. Hence, higher the IDV, higher the premium amount.
-- Fuel type
Usually, premiums rates for petrol, diesel and CNG variants of a car are different as their market prices (or IDVs) are also different. As diesel cars are more expensive, insurance policies on these cars demand higher premiums than petrol and CNG cars.
-- Safety Aspects
If your car is equipped with certified safety gear like GPS tracking device, anti-theft device, airbags, gear lock, etc., then the premium amount of your policy can be lower as chances of your vehicle getting stolen or severely damaged decrease.
-- Personal profile of vehicle owner
Your age and gender may also affect your premium amount. Usually, customers aged 18-25 years pay higher premiums than their older counterparts as they are considered to be ‘high-risk’ drivers. Similarly, women may be asked to pay less premiums than men as they are considered to have better driving acumen than men. Your driving history and any major insurance claim in the past can also play a role in determining the premium amount of your current policy.
Add-ons provide extra coverage to an insured car at a nominal additional cost. Your premium amount increases with the increase in the number of add-on covers you choose. So, it is important to weigh the benefits against the additional premium cost before you opt for an add-on cover.
Conclusion: Now that you know what affects your car insurance rates, you can try and find ways to adjust your premium amount so that it fits your budget without compromising much on coverage.
Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.