Car Insurance – What Helps Determine the Premium Value?

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Car Insurance

Car insurance is one of the most crucial aspects of automobile ownership. The protection that it offers does not only cover your vehicle but covers the person in the driver seat too. Therefore it is very relevant to know more about the factors that influence a car insurance premium.

You can opt to choose an inexpensive policy, without having to compromise in the coverage of the insurance that it provides. You can find out more about the aspects that can help you make the right call when you plan to renew or buy a new policy. You can also choose to give due importance to the claims procedure as well.

Several factors can help determine or influence the affordability of an insurance product.

Car variant

This factor refers to the basic composition of the car. It can refer to the type of variant of the car, the volume of the car in terms of its cubic capacity. These have a direct relationship with the amount of premium that you need to shell out for the particular model of car that you own currently or are planning to own in the days ahead.

For example, when you compare a luxury sedan to a hatchback, you can see that the premium for the earlier one will be higher than the other.

Age of Vehicle

The age of your vehicle links to two crucial aspects of car insurance, which are both interrelated. These are the IDV or Insured Declared Value and Depreciation. Clubbing the two helps ascertain the amount of the premium for the insurance that you opt for.

Depreciation of vehicles is the natural wear and tear over time which leads to the car value reduction. IDV or Insured Declared Value is the current value of the vehicle in the market.

Under usual circumstances, the value of an old car or its IDV will be less as it will have more depreciation. Therefore, the cost of insurance will also be less to insure an old vehicle, while for a new one you have to shell out more.

The Area

The value of the insurance premium can vary, depending on the area of insurance in some parts of the world. It is especially true when a vehicle is in use in the urban setting compared to one in the other environments.

A car in an urban environment is more prone to accidents, as there are more congested roads and higher traffic.

Coverage Type

Many countries often have the requirement for third-party insurance. The other own damages component may not be mandatory in such cases. The third-party coverage generally helps to cover up the liabilities due to third-party interventions.

If you opt for a comprehensive plan, it can help cover your damages and any third-party liabilities. There are also options to have add-ons. Since the third-party liability policies have lower coverage, the premium is also less than the comprehensive policies. The premium amount appreciates in the case of higher policy coverage.

Add-Ons Availability

When you shell out additional money for the car insurance, you get the option to choose add-on services that can help increase the coverage of the vehicle. The extra security contributes to the higher premium amount.

The most commonly opted add-ons include:

  • Engine protection cover
  • Roadside assistance cover
  • Zero depreciation

It is not wise to opt for all the add-ons that are available for particular motor insurance. You can choose only those add-ons that you feel can help you significantly to meet your needs.

No Claim Bonus

Many regions have insurance companies that offer benefits to the vehicle owners in terms of a discount on the premium amount. It is generally on offer to those who do not make any claims in the previous year or policy period. NCB or No claim bonus can be on your consideration set if the same is applicable in your region before you make a call to raise the claims.

Voluntary Deductibles

Your insurance premium can go down if you choose to opt for voluntary deductibles. It is because the amount that you pay is basis a predetermined value. It can consequently help the insurer pay less at the time of a claim and hence charge you a lower premium.

So the above factors can help you make a better decision while decking in the insurance for your vehicle. Whether you are opting for an insurance renewal or a new policy, knowing these nuances of premium can help you opt for a policy with a relatively lower and apt premium for your need.

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