Key factors that determine car insurance premium in India

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Key factors that determine car insurance premium in India

12 December 2017
The premium you pay to receive insurance cover differs from car to car, owner to owner. Here are the crucial factors that come into consideration when the figure is being decided.
 
 

There’s absolutely no doubt that Motor Insurance is a must for every vehicle owner. It not only protects your car in the event of any damage or disasters, it also protects you.

But the question remains- how much is it going to cost?

The premium you pay to receive insurance cover differs from car to car, owner to owner. Here are the crucial factors that come into consideration when the figure is being decided.

Model of the Vehicle

The amount of premium you pay depends largely on its Insured Declared Value, which is a fancy way of saying “market value”. Thus, the more expensive your car, the higher the premium you pay. It’s thus safe to assume that imported brands and bigger cars like SUVs or high end sedans will charge more premium than hatchbacks. Similarly, for Fuel Type, premium is generally higher for diesel vehicles.

In addition, the year of manufacture and the date of registration of the vehicle will also be taken into account. If a vehicle comes with rare or expensive spare parts, that will increase its insurance premium too.

Purpose of the Vehicle

Car insurance is available for personal as well as commercial vehicles. If you are using your vehicle commercially, insurance companies are bound to charge you a higher insurance premium, given that it’s a source of income.

Safety Devices

Modern cars are built to ensure the safety of all passengers. They come with state-of-the-art safety features like airbags, advanced braking systems, robust locks and anti-theft devices. Thus, some insurers increase premiums for cars that are more susceptible to damage, occupant injury, or theft, and lower rates for those that fare better than the norm.

You can avail a discount of up to 2.5% on your premium if your car is inherently safe-provided its features are included in the list approved by Automobile Research Association of India (ARAI)- so it’s advisable you do some research before you buy.

Insurance Zones

Where you live and the location your car is registered in also influences the amount of motor insurance premium you pay. ‘Insurance zones’ are thus created by insurers according to a vehicle's vulnerability to damage or loss.

Due to higher rates of vandalism, theft, and accidents, urban drivers pay more for car insurance than do those in small towns or rural areas. This zonal bifurcation thus generally comprises of metro cities and rest of India.

And so much more…

While the above factors are essentially what Indian insurers consider before deciding car insurance premium, there are a number of additional factors that are likely to become important soon, given the rapid rate at which the insurance industry is evolving.

These factors include your credit history, the distance your car has travelled, whether or not it’s regularly serviced by an authorised dealer, and even whether you, as an individual, have a history of getting into car accidents.

Lesson to be learnt?

Drive safe. Not only can that save your life, it can even save you money.

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