Top Factors That Determine The Premium of Your Car Insurance Plan

Managing Cars is an expensive business. Insuring your car with the most suitable car insurance plan helps you protect yourself from all kinds of financial liabilities which may arise due to an unfortunate event like road accident, natural calamity, man-made disasters, theft or third party liabilities. A car insurance plan can be purchased by paying a premium for it. Premium is nothing but the cost of a car insurance plan. There are various factors which affect the premium of your car insurance plan. In this article, we will discuss these factors in detail.

Factors Determining The Premium of Your Car Insurance Plan

Car insurance providers or companies have certain criteria and algorithms that help them determine the premium cost based on your personal information and company claim data. Being aware of the factors that affect your premium rates will help you to make an informed decision at the time of purchasing insurance. These are the factors affecting the premium-

1. Model Of The Car

Your car’s manufacturer, type, engine’s cubic capacity, etc will have a direct impact on the car insurance premium. This is mainly because the insurance premium depends on the value of your vehicle and is termed as Insured Declared Value (IDV). Apart from the IDV, the size of the car and the engine capacity are also major indicators to determine the insurance cost. The bigger the car, the lower the premium.

2. Age Of The Car

The age of the vehicle is taken into account mainly to calculate the Depreciation and Insured Declared Value (IDV). Depreciation is the reduction in the value of any commodity or asset owing to natural wear and tear over a period of time. IDV is the present market value of the car. An old car will have more depreciation and less IDV which implies that the cost of the insurance premium will cost less than for a new car.

3. Location of Registration

Location is considered an important factor that determines the Insurance premium. If the car is used more in an urban setting, the premium costs are high as accidents are more prone to take place in urban areas. Whereas, driving a car in a tier 3 city or a semi-rural area will be considered less risky. Thus, the premium cost for driving your car in such areas will be lesser.

4. Type of Insurance And Add-Ons

Having a basic third-party insurance for your car is mandatory by law in India. It offers coverage against third-party liabilities but doesn't provide any sort of protection to the policyholder. A comprehensive car insurance policy covers your own damage along with third-party liabilities. These policies can be enhanced with the help of add-ons. Having third-party insurance costs less than comprehensive coverage but, it leaves the policyholder underinsured. Adding add-ons also increases the premium cost. The premium cost increases with the coverage.

5. No Claim Bonus (NCB)

Insurance companies offer a discount on your premium when you haven’t raised a claim during the policy year. Make sure to check your NCB component before raising a claim and decide if it is absolutely necessary.

6. Modifications of Your Car

Modifying your car based on your preferences has become simple owing to the high-end technology. Different types of modifications will affect your premium cost in different ways. Having modifications that enhance security will decrease the premium while modifications that enhance the appearance and performance of the car will increase the premium cost. Make sure that you inform your insurer about these modifications to avoid rejection of your insurance claim.

7. Deductibles

Opting for a Voluntary Deductible is an option to reduce your insurance premium. This involves the policyholder will contribute a predetermined amount to the claim amount which will reduce the premium of the insurance.

 Take Away

Car insurance premium plays a crucial role while buying or renewing car insurance. Make sure you buy a policy that has an affordable premium along with adequate coverage. Insurance is not an obligation, but a plan that helps you to handle any financial liability. Make sure that you purchase your car insurance from a verified insurance provider or company to avoid unnecessary extra costs.  

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Benefits of Car Insurance Premium Calculator

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.