Insurance premium rates are among the crucial car insurance factors that need to be considered when purchasing a new insurance policy. But do you know there are multiple factors that affect car insurance rates?
If you are all set to purchase car insurance but worried about the cost, we have got you covered!
This blog answers the most anticipated questions: what affects car insurance rates? Alongside highlighting the factors that affect car insurance rates, we will share some tips to help you reduce your car insurance cost.
Factors That Affect Car Insurance Rates
Make and Model
The make and model of your car most significantly affects your car insurance rates. This is due to the difference in the cost of repairing and replacing the particular vehicle.
For example, sports cars and other luxury cars incur very high repair costs as compared to mid-range and low-range cars. As a result, the insurance cost of luxury cars is higher than that of regular four-wheelers.
Insured Declared Value (IDV)
IDV or Insured Declared Value refers to the maximum sum insured your insurance provider will pay in the event of total loss of your insured car. Note that this amount is equivalent to the current market price of your car.
Typically, a car with a higher IDV attracts higher insurance rates as compared to one with a lower IDV.
Age of Car
The age of your car is another crucial factor that affects car insurance rates. Generally, brand-new vehicles have a higher insurance cost due to increased risk exposure and higher repair costs.
On the other hand, the second-hand or used car insurance cost is relatively lower.
Type of Policy and Add-ons
Multiple types of car insurance plans are available in India. These include third-party insurance, comprehensive car insurance, pay-as-you-go car insurance and many others.
Each of these plans has different features and insurance premium rates. For example, the premiums of a comprehensive car insurance plan are usually higher than those of any other policy.
Similarly, the number of add-ons/riders in your insurance plan also impacts your insurance cost. Your insurance cost will be higher if you have purchased multiple add-ons with your primary car insurance.
Customisations
Any kind of modifications and customisations in a vehicle also lead to an increased premium rate.
The reason behind this is very obvious—these modifications tend to increase the vehicle's repair/replacement cost while increasing its risk exposure.
So, consider taking the insurance premium cost into account before making any modifications to your car.
Security Features of Car
Cars equipped with additional safety features such as anti-lock brakes, airbags, anti-theft devices, sensors, etc., tend to attract lower premium rates as they significantly lower the risk of accidents and injuries.
However, if your car lacks these features, you may face higher insurance costs because your insurance company will associate it with a higher risk of damages and losses.
Your Location
The city or town of your residence also influences the car insurance premium rates. Areas with high population and traffic congestion problems are linked with an increased risk of accidents, theft and other such events.
Therefore, you may attract higher car insurance premiums rates if you live in such an area.
Tips to Reduce the Car Insurance Cost
As you can see, there are multiple car insurance cost factors that come into play when calculating the cost of your insurance premiums. If you are worried about the higher insurance cost, below are some tips that will help you bring your premiums down to your budget.
Choose Right Plan
If you have a limited budget for car insurance, it is advisable to choose your plan wisely. Instead of a standard plan, you can opt for usage-based plans such as a
pay-as-you-drive policy.
With this plan, you pay premiums only for the number of kilometres you have driven your car. However, if you are an extensive driver, a comprehensive car insurance policy is recommended to ensure broad coverage.
Look at Add-ons
Add-ons or riders are paid coverage that offers extra coverage with your existing car insurance policy. Some of the most popular car insurance riders include zero depreciation cover, roadside assistance cover, engine protection cover, etc.
Although these are useful for enhancing your vehicle's overall coverage, they come at an additional expense that tends to increase your insurance premium. So, if you want to lower your insurance cost, choose your add-ons wisely and avoid the ones that are not necessary.
Select Higher Deductibles
If you don't already know, high premiums are proportional to low deductibles and vice-versa. These are the out-of-pocket expenses you agree to pay in the event of a claim. Your insurance company covers the remaining expenses.
So, an excellent tip to reduce your insurance cost is to choose higher deductibles.
You can use our car insurance premium calculator to
calculate car insurance premiums and determine average car insurance rates by age and gender.
Compare Multiple Policies
Comparing multiple car insurance plans is a great way to find an affordable plan that suffices your coverage requirements.
You need only shortlist multiple plans according to your requirements and compare them based on factors such as premium rates, inclusions and exclusions, claims settlement ratio, benefits and so on.
This simple practice will help you buy the best car insurance policy that perfectly aligns with your budget and coverage needs.
Install Safety Features
Adding safety features to your car can ensure a safe driving experience and help you get low insurance premium rates. So, go ahead and install features such as airbags, speed sensors, anti-lock brakes, trackers, etc., in your car to reduce its risk exposure.'
While these additional features will cost you a bit extra, they will ensure a safe driving experience and reasonable premiums in the long run.
Buy Online
There are two ways to buy car insurance: online via the insurer's website or offline via your local insurance agent. The benefit of buying your car insurance online is that it allows you to take advantage of exciting offers and discounts on your policy purchases.
These rewards can significantly help you lower your insurance cost. By purchasing your plan directly from the insurance provider, you can also bypass the additional fees charged by the intermediaries or insurance agents.
Maintain a Good Driving Record
Here is the most important tip to receive low premium rates: Drive responsibly and maintain a clean driving record. These include following traffic regulations and obeying all the official guidelines.
This will encourage your insurance provider to reduce your premium rates, considering you a safe and responsible driver.
Does Car Accident Affect Insurance Rates?
Yes. Car accidents can significantly affect the insurance premium rates. This is because car insurance companies consider such cars risky or more prone to accidents. This is especially true if you have a poor driving history and your car was involved in multiple accidents before.
Besides higher premium rates, multiple car accidents also lead to the loss of no-claims and other bonuses that can be used to reduce policy premiums.
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Frequently Asked Questions
Is car insurance mandatory in India?
Yes. Having car insurance is mandatory for all four-wheeler owners according to the Indian Motor Vehicles Act. You must have at least third-party insurance if you want to drive your vehicle on public roads. Note that any failure to present an insurance certificate to the traffic authorities can lead to hefty fines and penalties.
Why is comprehensive car insurance so expensive?
Comprehensive car insurance policies are generally expensive because they offer coverage for a broad list of inclusions. They also offer several other benefits that tend to increase the overall cost of the policy.
Does car colour affect insurance rates?
No. Car colour does not affect insurance rates. Instead, insurance companies consider factors such as type of car, driving history, and type of coverage alongside other car insurance cost factors to calculate premium rates.
Does comprehensive car insurance cover third-party liabilities?
Yes. Comprehensive car insurance plans offer coverage for your own damage as well as third-party damages and liabilities resulting from your insured vehicle. This is the reason why it is recommended to invest in a comprehensive car insurance plan instead of buying separate policies for own damage and third-party liabilities.