In India, it is mandatory to get insurance for a car. While it is crucial to compare car insurance plans before buying one, it is also essential to know what factors determine the rate of premium payable. Premium is the monthly/ yearly amount one pays to the insurance company to buy or renew car insurance. You can use an online car insurance premium calculator to determine the payable premium for getting your car insured.
By being aware of the factors that calculate four wheeler insurance premium, you can get a good deal and lower the premium payable.
Model, Make and Size
The premium to get insurance for a car that is luxurious and of high-quality will be higher than the premium for an everyday-use, hatchback car. For instance, the premium for a Ferrari will be higher than that of a Hyundai. The car’s model, variant, manufacturer, its cubic capacity, and even its size have an impact on the premium. For instance, large, sturdier built cars like SUVs have lower premium rates as compared to smaller ones due to their higher safety ratings.
Depreciation and Insured Declared Value (IDV)
To calculate car insurance, the Depreciation value and Insured Declared Value (IDV) is taken into consideration. Depreciation value is the reduction in the value of the car due to the wear and tear caused by long-time use of the car. IDV is its approximate and current market value. The market value of an old car will be lower than that of a new one as it has a higher depreciation value and lower IDV. Newer cars require the payment of higher premium since they are susceptible to theft and damage and higher maintenance expenses.
The geographical zone/location of the vehicle owner also helps to calculate car insurance premium. Insurance companies have demarcated the country into Tier-1, Tier-2 and Tier-3 zones. Tier 1 zones include metropolitan cities like Mumbai, Delhi, Bangalore, etc. Since urban cities have high traffic, congestion and population as compared to tier 2 or tier 3 zones, the car is more prone to accidents, damage or theft. This increase in risk to the car tends to increase premium rates.
Usually, insurance companies check the number of safety features in a car to calculate car insurance premium. The higher the number of safety features (like anti-lock brakes, seat belts, airbags, running lights, etc.) the lower is the premium. Generally, the installation of safety devices is more in new cars than old ones. So newer cars with safety devices get discounts on premium rates. However, such anti-theft devices can be installed in older cars as well.
Add-on covers offer extra protection and value to a car. But they increase the rate of premium payable. Popular add-ons include a Zero Depreciation Cover, a Consumable Cover, an Engine and Tyre Protection Cover, and Roadside Assistance Cover among others. While getting add-ons widen the scope of coverage provided, they can also burn a hole in your pocket. Thus, it is advisable to pick only those add-ons that are vital for the optimum coverage and security of the car.
Purpose of use and driving record
The purpose of car use also helps calculate car insurance. A car meant for commercial use will cover more miles and hence require more maintenance. This tends to attract higher premium rates in comparison to a car bought for personal use which gets premium at discounted rates. Your driving record will also determine if you get insurance for car. For instance, if you have a history of reckless driving, accidents and claims, you will be charged a higher premium upon renewal.
Cars that run on diesel generally tend to attract higher premium rates. This is because diesel usually costs more than petrol and CNG. Diesel cars also fall in the luxury-car category, which increases their IDV. Hence, insurance for a car that runs on diesel is pricier as compared to a car that runs on petrol/CNG.
Buying insurance for a car from an agent or dealer will likely cost you the payment of some commission amount for the intermediary services provided. Moreover, the policies offered could also be fixed and non-customizable. Why spend extra paying premium, when you can get/renew insurance for a car from the insurance company?
No Claim Bonus (NCB) and Deductible
An NCB is the discount one gets from an insurance company for a claim-free year. Generally, insurance companies offer a discount on the premium if you haven’t raised a claim in the duration of your policy. However, this is applicable only for renewals. A Deductible is a voluntary co-payment system where the insured car owner contributes a fixed amount while raising a claim. This decreases the rate of premium.
Type of coverage
The type of coverage one gets helps calculate car insurance premium. A standard insurance plan will cost less than a customized one with more add-ons. However, it can leave you underinsured. Hence, it is advisable to customize a policy in tune with your needs.
Compare car insurance plans to get the one offering the best coverage and premium. Also, a car insurance premium calculator will give you an idea of the premium payable for your car.