scorecardresearchEver wondered how your insurance company decides on your car premiums?

Ever wondered how your insurance company decides on your car premiums? Here are 8 points

Updated: 12 Apr 2022, 09:46 AM IST

Not all insurance companies charge the same premiums on the same or different kinds of vehicles. Different insurers have different factors with which they map or measure the car insurance premiums that you must pay regularly without fail to avail the benefits of having your car insured. 

Buying car insurance 

Buying car insurance 

You did not decide to buy your car suddenly. You must have taken a lot of time to decide which brand to own, its features, colour, style, features, mechanism and, last but not the least, its price. You must take the same amount of time to decide which car insurance cover you must buy. Not all insurance covers are the same. You may wonder how car insurance companies decide on the premium rates considering that these differ across cars and vehicles under different segments.

The factors that decide your car insurance premiums include:

Make and model of the car

A new and expensive model of a car will attract more premiums than their old or second-hand counterparts. Modern cars may be more resilient to today’s conditions, but their expenses are more, thus necessitating an increased insurance cover that comes at hefty premium charges. Also, the servicing of many car models may not be available in India, thus, requiring expert servicing. This too comes at a price, which explains why the insurance premiums on foreign models are more than the amount spent on the domestic ones.

How old is the car?

Like humans, even our cars’ ages matter. An old car that has travelled much and has suffered more depreciation will fetch a lower market value. This also translates to lower premium charges on the car’s insurance. Older cars will beget fewer premium charges than the new ones considering that the former is a lot less costly than the new models being sold in the market.

Region of operation

Think of the frequency of car accidents, car thefts or the constant wear and tear owing to pot-holed roads and detoured highways in urban areas compared to the semi-urban regions. The constant damage that naturally and inevitably occurs due to driving your car on such roads means that your vehicle is more prone to accidents and subsequent damage. Where you drive your car or where it stays operational most of the time is a big factor in deciding on insurance premium charges.

Type of coverage

Third-party motor insurance liability coverage is mandatory. But what if car owners seek coverage that pays for their damages too? This would incur extra charges as hefty premiums. If you are looking for comprehensive insurance cover, you must pay extra towards the same. The premium charges depend on the type of insurance coverage that you are looking for.

No Claim Bonus

This is a benefit accrued to most policyholders as they seek lower premiums for not raising any claims in a given year. The bonus is applied at the time of policy renewal when the policyholders get discounts on the premiums payable. Though one can use the NCB to cap the insurance premium amount, the latter can be capped up to a certain percentage only. Also, the NCB cap applies to premiums charged towards payment sought for own damage.

Common exclusions in insurance policies. 

Add-on Covers

You may prefer some added features including automatic renewals, NCB protectors, roadside assistance, etc for which you are ready to pay extra premium charges. These features are available only if you are ready to pay over and above the insurance premium amount. While these increase the premium costs, opting for them would benefit you in the long run provided you choose only those that are relevant to your vehicle and would be useful in the future.

Anti-theft Device Installation

You buy a car and would like to secure it against theft. Buying an anti-theft device and then installing it in your car would be the sure way forward. While this adds to the cost of your car, it also ensures a necessary step is taken to secure your vehicle. Installing such a device certified by the Automotive Research Association of India will reduce the premium charges on your car. Check if your insurance company offers this nature of discount to avail the same.

Voluntary Deductibles

There may be many charges that you pay from your pocket towards the repair and maintenance of your vehicle. These predetermined or prepaid expenses are deductible from the insurance premium to be paid.

First Published: 12 Apr 2022, 09:46 AM IST