FACTORS THAT DEFINES A CAR INSURANCE PREMIUM

1. Car variant

The vehicle’s basic composition and its type, cubic capacity of the engine, etc., impact its premium directly, with the premium for some vehicles, for instance, a luxurious sedan, being higher than that of a hatchback.ariant

2. Vehicle’s age

The age of the vehicle accounts for two very essential, interrelated concepts about car insurance. Depreciation and Insured Declared Value (IDV). Depreciation is the reduction in the value of an asset due to natural wear and tear over some time, and IDV can be understood as the approximate current market value of the vehicle. Usually, an old car will have more depreciation and less IDV, which means that it will cost less to insure an old vehicle and more to insure a new vehicle.

3. Area of insuring

“Insuring a car in a metro costs more than insuring one in a tier-3 city because cars are more prone to damage in an urban setting that is usually associated with factors that increase the frequency of accidents such as traffic and congested roads.

4. Type of coverage

In India, a basic third-party insurance policy is mandatory. However, the other own damage component of a policy is not mandatory. While the third-party cover is offered against third-party liabilities, a comprehensive car insurance policy covers own damage along with third-party liabilities. Plus, coverage can be enhanced with the help of add-ons.

5. Availability of add-ons

Add-ons offer extra security and come at an additional cost, thus, adding to the cost of the premium. Some of the common add-ons are engine protection cover, zero depreciation, roadside assistance cover, etc. “You shouldn’t buy all add-ons along with your motor insurance, you must go for only those add-ons that you feel are necessary,"

6. No claim bonus (NCB)

Insurance companies offer a discount on the premium during car insurance renewal if a claim hasn’t been raised during the previous policy period. The NCB component must always be considered (if applicable) before deciding whether or not to raise a claim.