• How Variables Affect Car Insurance Premium?

    Car Insurance
    • Protect yourself with third party or comprehensive cover
    • Use bumper to bumper policies to reduce your liability
    • Enjoy facilities like zero depreciation and roadside assistance covers

    A car insurance policy offers coverage against theft, damages caused to the vehicle or property, or injuries suffered by persons. According to the Motor Vehicles Act, it is mandatory for all motor vehicle owners to avail insurance for their vehicles.

    A car insurance policy should be purchased not only because it is mandatory but also because the expenses incurred on getting the car repaired for damages caused by an accident will be covered. Further, any third-party liability will also be covered. A car insurance policy is an agreement between the insurer and insured. The policyholder is required to pay a premium to the insurer and the insurer, in turn, will foot the repair bills of the car. There are a number of factors that determine the amount of premium payable to the insurance company.

    Variables that affect car insurance premium

    • Age of the driver: Young drivers are considered inexperienced in driving and hence, more likely to meet with an accident. Drivers above the age of 25, on the other hand, are considered to be slightly more experienced and less likely to cause accidents. Since the risk is higher for younger individuals, the insurance company will charge young drivers more compared to slightly older drivers.
    • Location: The insurance company, before issuing an insurance policy, will run certain checks to find out if the location the driver resides in is prone to natural calamities, vandalism, theft, etc. Such individuals will be charged more than the individuals who stay in safer geographical zones. Also, the amount of traffic and congestion in the area that could possibly cause accidents will also be taken into account.
    • Vehicle type: An insurance policy for a high-end car with premium features will cost much more than a regular car. This is because the costs involved in the repair of expensive cars are high. Similarly, insurance for a bigger car such as an SUV, or a car with a high cubic capacity will be slightly more expensive.
    • Purpose of the vehicle: Insurance companies will evaluate the purpose for which the car has been purchased - whether it is for personal use or commercial use. Insurance for commercial vehicles will cost more since it is used more frequently and hence poses a higher risk.
    • Type of coverage: A person who opts for only a third-party cover will have to pay a low premium whereas a person who purchases a comprehensive policy will certainly have to pay a slightly higher premium because such policies provide coverage for theft, damages, third-party liability, etc. Additionally, if the person attaches riders to the base plan to enhance the coverage, such plans would surely cost a few extra rupees.
    • Amount of coverage: If an individual chooses a higher insured amount, he/she will have to pay more premium compared to a person who chooses a lower insured amount.
    • Deductibles: The voluntary deductible under a car insurance policy is inversely proportional to the premium payable. So, agreeing to pay a higher percentage of the total expenses incurred will let the person pay a lower premium amount during the tenure of the policy.
    • Driving habits: Insurers will look into the person’s driving activities such as the distance covered, frequency of drives, etc. to fix the premium amount to be paid.
    • No-claim bonus: A no claim bonus is offered to those who have made no claims during a policy period. Policies that have a no-claim bonus will have a specified premium rebate in the following years.

    While certain factors such as the age, location, or type of vehicle cannot be altered, one can maintain a good driving record, avoid making unnecessary claims to earn the no-claim bonus, and opt for a marginally higher deductible to avoid paying high premiums.

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