Car insurance is an agreement between the insurer and the insured where the insurer agrees to protect the insured against any liabilities that he/she incurs as a result of mishap. In India, as per the Motor Vehicles Act, it is mandatory to insure your vehicle with at least a third-party liability cover. There are two kind of insurance policies available in India; comprehensive car insurance policy and third-party liability cover. There are a number of factors that determine the car insurance premium, a few of them are mentioned below:
Your financial credit score is vital when it comes to deciding on your car insurance premium. Most of the insurers take your credit score into account before deciding on your insurance premium, therefore it is good to keep your credit score score healthy, this may help to bring down your insurance premium.
Age has an important role to play in deciding the insurance premium. A driver belonging to the age group of 18-25 years is deemed less experienced and more accident prone, hence is charged a higher insurance premium. While, a driver belonging to the age group of 26-55 is deemed more experienced and responsible drives, hence are charged a lower premium.
Your Area of Residence
Your geographical location has an impact on your insurance premium. If you live in places that are accident prone like the metro cities, you will be charged a higher premium while living in low accident prone places will get you a lower insurance premium.
Your profession too matters in deciding your insurance premium. Someone who commutes less like a doctor, a nurse etc. will be charged a low insurance premium. But those who travel a lot are prone to accidents, like a delivery personnel, lawyers, etc, who don’t have a fixed route of commute, are charged a high insurance premium.
Your Marital Status
Your married status also is a deciding factor in car insurance. Someone who is married and has a family is considered more responsible and is charged a feasible or low insurance premium as the risk factor is considerably less here.
Car Model and Make
Your car’s model and make also determines your car insurance premium. A car model that has had a bad history of accidents will not be favoured by insurers, hence the respective car owners will have to pay a higher insurance premium. While the owners of car models that have been a success when it comes to performance on roads will have to pay a lower insurance premium.
Vehicles that have been installed with ARAI approved safety devices such as GPS tracking system, car alarm, etc. will get you a discount on your insurance premium, as these cars have enhanced security features. Insurers today motivate car owners to install safety devices by offering a discount on the car insurance premium.
Age of the Vehicle
Vehicle’s age is an important factor in determining the car insurance premium. A vehicle over 5 years old will have a low market value due to its depreciating factor. Also an older vehicle will go through regular wear and tear which will add to its loss in value. Therefore, an aged vehicle will fetch you a higher insurance premium compared to a comparatively new vehicle.
Engine Capacity of the Vehicle
The higher the power of your vehicle’s engine, the higher will be the insurance premium. A vehicle with a high power can be risky if the driver decides to drive it at a higher speed, hence the insurance premiums applicable on such vehicles are higher. A vehicle with a lower engine capacity yields low power and hence will fetch you a lower insurance premium.
Your Driving Record
A person with a good driving record, who hasn’t raised many or no claim at all will be given discount on insurance premium. A good driving record means the person can be trusted with his/her vehicle and is responsible while driving the vehicle at all times. Insurers favour such people.
No Claim Bonus (NCB)
No Claim Bonus or NCB is a discount on insurance premium offered to the policyholder by the insurer for every claim-free year. You can accumulate the NCBs for a maximum period of 5 years, starting at a discount of 20% and increasing upto a maximum of 50%.
Deductibles in Insurance
Deductibles in car insurance are of two kinds, compulsory deductible and voluntary deductible. Compulsory deductible is the part of the insurance amount that you have to mandatorily pay at the time of claim settlement as fixed by the insurer. While, a voluntary deductible is part of the insurance amount that you opt to pay at the time of claim settlement. This is fixed by you. The higher the amount of voluntary deductible you opt to pay, the lower will be your car insurance premium.
Types of Insurance Policy
Your car insurance premium also depends on the kind of insurance policy that you have availed. A comprehensive car insurance cover will always cost more than a third-party liability cover due to the difference in the insurance coverage provided by either.
Add-on covers or riders are a way to extend your insurance coverage and to include some of the insurance exclusions in your insurance policy. The kind of add-ons you chose and the number of add-ons you chose impacts your car insurance premium. Depending on the kind and the number of add-ons, your insurance policy premium can increase or decrease.
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