Checking your cart for what makes the premium of your car insurance? Here are some common terms that you will discover in your cart.
You are welcoming a brand-new ride, or you already know the importance of getting a car insurance policy, the next step is to invest in an efficient car insurance. But, what often goes unnoticed when buying car insurance and the way its premium is calculated.
Insurance companies consider various factors when calculating the premium amount for your car, and it can be essential for you to understand them before signing up.
In this article, our attempt is to decode and make things easier for you when purchasing car insurance.
Your first task when investing in a car insurance policy is to choose from two types of policies available in the Indian market. These are as follows:
- Third-party Insurance Cover – This type of insurance covers only any form of legal liability that you face from a third-party as per the loss or injury they have sustained by your vehicle.
- Comprehensive Cover – This type of insurance covers third party and damages to your car. Also, it ensures financial protection against theft of the vehicle and provides a personal accident cover.
Choosing a coverage type is the major aspect of your premium. A comprehensive cover premium will surely cost more than a third party cover considering the wider protection it offers. The premium for the third party cover is standard depending on the engine capacity (cc) while comprehensive cover varies.
In this next sections, we will understand the 5 key elements taken into consideration when setting the premium amount for your car insurance in case of comprehensive coverage.
#1 – Type of Car
This factor takes into account the model and makes of your car along with its market value or Insured Declared Value (IDV). Higher premiums can be expected for high-value car brands, bigger cars, and diesel cars. Apart from these, for third-party car insurance, the cubic capacity (cc) is also taken into the loop when determining the premium amount.
Apart from these, for third-party car insurance, the cubic capacity (cc) is also taken into the loop when determining the premium amount.
#2 – Intended Purpose of the Car
The purpose of a car is extended to personal use or commercial use. A private car for yourself or your family will yield to a lower premium against a car used commercially. This is because commercial cars are treated not as luxury/convenience, but a source of income for the insured.
#3 – Location
Your location and place where you will use your car also play a part in determining how much premium insurance companies will take. If you ply your vehicle mostly in metropolitan cities or urban areas, with the amount of traffic, high speeds, and other imposing factors, the risk is high for damage, theft or loss/injury for a third-party.
The location of the car in the high-risk area will strikingly increase the premium on your car than what you would have to pay if you lived in a small towns or villages. Even your neighbourhood is considered when asserting premium amounts.
#4 – Age of the Car
The model’s year of manufacture is also examined while calculating the premium to be paid. For first-time car insurance customers, companies will surely have a good look at the functioning of your car and especially, try and club it together with the age of your vehicle.
New car owners will pay more while, the value of the car and so the premium decreases as it gets old.
#5 – Your Personal Additions
While these factors cover the major parts of the calculation, there are other factors considered by few insurance companies which include:
- Additional (add-ons) covers
- Security devices
- Discounts
- Distance travelled for older cars
- Service history for older cars
- Accident history for the insured individual (if any)
Conclusion
Now, since you have decoded each area you were previously unsure of, it is time to put the knowledge to use and ensure you pick the right time and place to invest in the best car insurance policy. And, also remember, drive safe!