As per law, it is mandatory to have at least a third party car insurance plan in India if you want to drive on Indian roads. It is strongly suggested that everyone should buy comprehensive car insurance to ensure cover for both third-party and damage to their own vehicle. The premium rates of car insurance vary from vehicle to vehicle and from person to person. There are a lot of factors that insurance companies consider while calculating the premium that you have to pay annually. Here is a list of the top 10 factors that affect your car insurance policy’s premium.
The main factor on which the premium will depend is the type of coverage you choose for the vehicle. Third-party liability cover is much cheaper when compared to the comprehensive insurance plan. However, you should not consider only the price of the policy to decide which one to buy. Comprehensive insurance policy will provide you with an overall cover and pay for the damages caused because of accident or theft. Indeed it is going to cost you extra, but it will be worth it.
- Type of Vehicle
The make, model and type of your vehicle play a vital role in calculating the premium. If you have a high-end vehicle, the premium will be higher. If you own a car that runs on a diesel engine, the premium will be higher in comparison to those who own a car with a petrol engine. The cubic capacity is also an important factor that insurance companies consider while calculating the premium.
- Purpose of the Vehicle
When you are opting for a Car Insurance Policy, you must declare the purpose of your car. If you are going to use it for commercial purpose, the premium will be higher in comparison to those who use their car for private use. As the vehicle is going to be a source of your income in case of a commercial vehicle, the insurance companies ask for a higher premium.
- Age and gender of the policy buyer
Your age is going to be an important factor while deciding the premium you have to pay. As per the insurance companies, if the person behind the wheel is young, there is a higher risk of an accident due to the lack of experience. If you are a middle-aged driver with a few years of experience in driving, the premium will be notably lower. Some insurance companies also consider gender while calculating the premium as a young male is considered to be more reckless behind the wheels as compared to female drivers.
- Location of the policyholder
Insurance companies have categorized the cities in Zone A and Zone B. The metro cities are placed in Category A. At the same time, rest of the country falls in Category B. The one who lives in a metro city is more prone to an accident as compared to someone who lives in cities under Category B. Thus, those who fall in Category A have to pay higher premium. Also, if your area is prone to man-made or natural disasters, you may have to pay an extra premium.
- Driving history of the policyholder
If you have a clean driving history with minimum claims, there is a chance that you will end up paying a lower premium than others. The insurance companies check the record of the driver before issuing a policy. If the person buying the policy has a history of reckless driving or have filed a number of claims, the company will charge a higher premium. Those who have no or less traffic rule violations enjoy lower premiums.
- No-Claim Bonus
Every insurance company adores drivers who do not file claims during the policy period. If you have made no claims in the previous year the company will offer you a no-claim bonus. It helps in keeping the premium on the lower side for the upcoming policy years. The companies prefer to reward good drivers by giving discounts on the premium for not filing a claim. Thus, if there is minor damage to your car that you can afford to get repaired, it is better not to file a claim. Keep in mind the difference you have to pay if you file a claim before asking the insurance company to pay for minor damages.
- Anti-Theft installations
Nowadays installing anti-theft devices on cars has become a common practice. Though it provides a sense of security for the car-owner, it has an additional benefit as well. If you are installing an anti-theft device that has been approved by the Automotive Research Association of India (ARAI) the insurance company will charge you a lower premium. These devices make it harder for the thieves to get away with the stolen car; thus, insurance companies offer an additional discount if you have such devices installed in your vehicle.
- Voluntary Deductible
Voluntary deductible is the part of the claim that the policyholder pays. The insurance company does not pay for such deductibles. If you have opted for deductibles while purchasing an insurance policy, your premium will be lower. Please note that you should only opt for voluntary deductibles if you are sure that you will be able to pay your part of the claim without any problem. If you have any financial trouble or limited source of income, this option should not be considered.
The insurance companies offer a wide array of add-ons that you can choose while buying an insurance policy. Some of the most common add-ons are Zero Depreciation Cover, Roadside Assistance and Towing Rider, Consumables Rider and more. Though in many cases these riders play an important role by providing the additional cover you must remember that these come with an additional price. While buying any add-on, make sure that you will need it and do not buy just because it sounds good to have the said add-on. It is better to read about them and compare these add-ons before buying.
Final words to consider
In India, you cannot drive a car without insurance as per the law. Though government mandates only third-party insurance, it is suggested that you should choose a comprehensive insurance policy to provide complete cover for the damage to your vehicle as well. Many factors affect the premium that you have to pay. By understanding these factors, you can control the premium amount and choose the best policy in your budget.