Car insurance premium is the overall cost charged by the insurance company to protect you and your vehicle in the event of any unforeseen risk or damage. These premium rates differ not only from owner to owner but also from vehicle to vehicle. There are a variety of demographic and vehicle related factors which affect your car insurance premium. Read on to find out what these are so you can save more on your monthly insurance premium amounts.
Demographic Factors Affecting Car Insurance
Your credit score can positively or adversely affect all your financial transactions, including your car insurance premium. Many insurance companies take into consideration your credit history while deciding your premium rates. Hence, a healthy credit history can help lower your car insurance premium while a low credit score may attract a higher premium.
Gender & Age
Gender and age play a vital role when it comes to auto insurance premiums. Young male drivers between the ages of 16-25 are usually charged a higher insurance premium as compared to women that age. Similarly, among senior citizens, male drivers are charged slightly lesser than old women when to comes to insurance premiums.
Where You Live
Your location can also affect the insurance premium that you pay. If you live in a safe neighbourhood where robberies and theft is a rare occurrence, chances are that your motor insurance premium will be lower as compared to someone who lives in a burglary and robbery prone neighbourhood. Also, cities are divided into zones – metro cities vs the rest of India - for insurance purposes. Vehicles purchased and located in metro cities usually pay higher premiums than those located elsewhere in India.
Car insurance companies do take into account your profession when it comes to deciding insurance premium amounts. If you are more likely to be involved in an accident due to the profession that you are engaged in, your insurance premium shall be higher as compared to someone who is engaged in a relatively lower risk profession. For example, journalists and delivery personnel are constantly travelling, putting them at a higher risk as compared to say, a pilot or doctor, who usually have a fixed commute to the airport or the hospital for work.
Your Marital Status
Your marital status can also affect your motor insurance premium amount. Married individuals are believed to be safer drivers as compared to unmarried individuals.
Vehicle Related Factors For Car Insurance
Auto insurance maintain data and statistics regarding claim ratios of different cars and their models in order to decide the premium rates. Vehicle models which have a higher history of claims will carry a higher premium than those which have a significantly lower claim ratio. Also, high-end models carry higher car insurance premiums as compared to low-or mid-end models as they are significantly costlier to repair in case of a collision.
Vehicle’s Safety Features
Nowadays, most vehicles feature sophisticated safety mechanisms like advanced braking systems, airbags, advanced locking systems, tracking devices, alarm systems, anti-theft devices, etc., making them not only safer to drive but also far less susceptible to damage or theft. Most insurance companies will lower or give you a discount on your car insurance premium if your vehicle is fitted with any safety device or feature as listed by the Automobile Research Association of India (ARAI)
Age Of The Vehicle
The older your vehicle, the lower its value gets, along with the Own Damage premium. If an old car is damaged, it is more likely to be totaled, and the cost of repairs might be higher than the value of the car itself. In such cases, it is more likely that the owner will simply dispose the vehicle. A new car, on the other hand, is less likely to be totaled in an accident and usually carries higher collision coverage rates than old cars.
Engine Capacity of The Vehicle
Motor insurance premiums also vary the capacity of the vehicle engine. For instance, cars with a powerful engine like a V8 yield more power as compared to a car with a V4 engine. Insurance premium, in this case will be higher for the one with a V8 engine as compared to that of V4 engine.
Your Driving Record
Your driving record plays a very crucial role when it comes to determining car insurance premium. Individuals with a tarnished driving history which is peppered with accidents, tickets for rash driving or DUI (driving under influence), higher number of claims, etc., are seen as high risk customers by auto insurance companies. In such cases, not only will the insurance premium be high but such customers are more likely to be turned down for receiving insurance. On the other hand, a clean driving record can definitely accelerate the process of you receiving an insurance policy for your car but also lower your premium.
Insurance Related Factors For Motor Insurance
No Claim Bonus (NCB)
A No Claim Bonus or NCB is provided by insurance companies to customers who have not made any claims on their policy for a stipulated period of time (usually 12 months). For auto insurance, the same process is applicable where individuals who have not made any claims on their policy are rewarded with a discount on their insurance premium which begins at 20% and can go up to a maximum of 50%.
Car insurance deductible are an important factor in your monthly insurance payments. The higher you set your deductible amount, the lower your insurance premium shall be.
Type of Insurance Policy
There are two basic types of which you can choose from. The first is a Third Party Liability Only policy which is compulsory by law and protects you against any liability which may arise in an accident involving your vehicle and results on any bodily harm/injury or damage to property of any third party. The other type of insurance policy is a Package policy which bundles Own Damage, Third Party Liability and Personal Accident Cover in one.
To enhance the coverage provided by your motor insurance policy, you can also opt for add-on covers. However, any add-on cover will be an added cost to your premium amount. It is wise to choose add-on covers based on your requirement to get the most out of your insurance policy.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017