Many people research the latest models available when buying a car. They also spend hours looking for the best safety features that their car must have. However, only a few pay attention to car insurance policy, another vital aspect of buying a vehicle.
While many people have limited or no knowledge about car insurance, they usually purchase vehicle coverage in India to meet the legal requirements. However, understanding how insurers set car insurance premiums can help you secure your finances. So, read on!
Why is Car Insurance Important?
According to the Motor Vehicles Act, it is mandatory for every car owner, whether buying a new or used car, in India to have third-party car insurance. Those who are looking for complete protection that not only covers third-party liability but also covers you and your vehicle must go for a comprehensive car insurance policy.
Bringing peace of mind to car owners, here are some other benefits of buying a car insurance plan:
Protection against theft, natural calamities and accidental damages
Access to a huge number of garages across cities to get the car fixed
Flexibility to include add-ons like roadside assistance cover and engine protection cover to enhance coverage
Factor Impacting Car Insurance Premium
Let’s dive deep to understand the six major factors that determine the premium when buying a new/used vehicle or going for car insurance renewal:
1. Car Owner Driving Record: In India, if you have a good driving record, you can enjoy better car insurance premiums. 2. Coverage Required: The amount of coverage required directly impacts the premium for your car insurance policy. While going for a comprehensive car insurance policy will incur a higher premium, it is essential at the same time. Also, the premium amount increases with the add-ons you purchase. 3. Frequency of Claims: Insurers reward the policyholders who don’t make any claims throughout the annual policy year by offering a discount (no claim bonus or NCB) on the premium for the following year. 4. Insured Declared Value: Generally fixed by insurers, insured declared value or IDV is the amount that reflects the current market value of your car. Simply put, IDV is the present price estimation of your car after deducting the depreciation value. Considering the fall in the value of your car due to depreciation, the insured declared value decreases as time passes.
It is to be noted that the higher your car’s IDV, the higher the car insurance premium amount. 5. Make and Model of Car: Generally, riskier cars, like sports cars, have a higher premium than their standard counterparts. Also, cars with higher cubic capacity or running on gas or CNG usually have a higher premium. 6. Safety Required: Installing safety features like efficient car locks and alarms and advanced anti-theft systems that use GPS can make you eligible for a discount on your overall car insurance premium.
Other Factors Affecting Car Insurance Premium
Here are some additional critical elements that impact car insurance premiums when planning to buy or renew car insurance.
Engine capacity
Indian or imported car
New or old car
Location of the car
Car owner’s profession and age
How to Calculate Premium Using Car Insurance Calculator?
For car owners' convenience, many reputable platforms offer online car insurance calculator, which are user-friendly tools for estimating the premium amount against the desired coverage.
You just need to feed these tools with information like the car's make/model, fuel type, age, and registration location. They will perform the complex calculations automatically and deliver results in a few seconds.
Notably, the below-mentioned formula is used to calculate the car insurance premium:
Car Insurance Premium = Own Damage Premium - (NCB + Discounts) + Third-party Liability Premium that the Insurance Regulatory and Development Authority of India or IRDAI fixes
Conclusion
Everything influences the premium amount when planning to buy car insurance online or otherwise, from the driver's details to the car's make and accessories installed. Also, having a thorough knowledge of what raises your car insurance premium can help you make an informed decision.
