As per The Indian Motor Vehicles Act, 1988, all the cars plying on Indian roads need to have insurance. Thus, the need for buying a car insurance policy can’t be ignored. Paying car insurance premium can be a burden for an individual’s pocket. The best way to avoid paying additional premium costs is to be aware of the important factors that affect them.
Many factors are considered while calculating the car insurance premium, particularly at the end of auto insurance companies. Knowing about such factors is very helpful to make a wise decision.
Premium is the first thing most people check while buying a cheap car insurance. Let’s explore the factors that determine the premium:
- Insured declared value/IDV
Insured Declared Value is the maximum amount provided by the insurance company in the event of theft or total loss of vehicle. It is the current market value of the vehicle. The IDV of your car decreases with the passage of time, with the fall in the value of your car due to depreciation.Along with the time, the IDV of the car decreases because of decrease in value of car due to depreciation. However, the car insurance premium is higher if you have higher IDV of your car.
- Insurance Location Geography
The premium rates are influenced by the location where you live and buy an insurance policy.Cities such as Ahmedabad, Bangalore, Kolkata, Mumbai, Pune, Hyderabad and Chennai belong to Zone A where vehicles are prone to theft and accidents. The remaining cities fall into Zone B. Zone A cities have higher premium rates as compared to Zone B.
- Coverage required
Premium of car insurance depends upon the coverage of the car insurance policy. Comprehensive car insurance incur higher premium than third party liability car insurance. The cost of the premium also increases with the add-ons such as zero depreciation cost, cost of vehicle towing in case of breakdown, protection of NCB benefits and many others. It is wise to opt for a comprehensive cover for a new vehicle, as cost of repairs of new parts would be high. Receive quotes for your desired policy using the online car insurance calculator.
- The Type of Engine
The car insurance premium is calculated based on two elements – third-party liability coverage and own damage coverage. Third-party liability cover calculation is based on the cubic capacity (cc) of your vehicle’s engine. The computation of own damage cover is based directly on the Insured Declared Value of your vehicle. In simple terms, the insurance premium amount for a 1000 CC engine vehicle would be lesser than that of a vehicle with 1500 CC engine.
Own damage cover computation is based directly on the IDV of your car. In simple terms, the insurance premium amount for a 1500cc engine car is higher than that of a 1000 CC engine car.
Set timely reminders for car insurance renewal so you do not have to suffer the consequences of having a lapsed policy
Understanding what goes into your premium can be helpful in choosing a policy that meets your budget and addresses your needs and requirements.