Factors that Impact the Car Insurance Premium

If you own a car, having your car insured should be your immediate step. With adequate car insurance car owners can protect their vehicle against, theft, damage or accidents. Car insurance is nothing but a charge the insurance company charges you, the car owner, for your vehicle to protect it from any unforeseen or unavoidable event.

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*TP price for less than 1000 CC cars. All savings are provided by insurers as per IRDAI approved insurance plan. Standard T&C apply.

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Above-mentioned prices are for a 7-year-old Maruti WAGON R AVANCE LXI (998 CC) registered in Gurgaon and 15 days before expiry of previous policy

Most insurance companies offer different premium rates depending on several factors. These factors are either vehicle related or demographic as determined by the India Motor Tariff.

Lets take a look at some of the governing factors that rule how much premium you need to pay annually for your motor vehicle.

Model of your Vehicle

This particular factor has two sub factors attached to it.

  • Year and model of the vehicle:-The Market Value also known as the Insured Declared Value of your vehicle is what helps determine the premium you pay. Hence the price of your car has a direct relation towards your premium payment. Needless to say, if your car fits into the expensive bracket, your premium shoots up. Imported cars, SUV’s, high end sedans attract a higher premium payment as compared to smaller cars like sedans. The type of fuel your car drives on, is also a deciding factor. For, e.g., a diesel vehicle will invite a higher premium as compared to a petrol run vehicle. Insurance companies also look at the year of manufacture and the date you register your car. Any expensive spares or rare parts could increase your premium payment as well.
  • Car claims:- Most insurance companies keep a tab on the ratio of claims and cars types. There are specific cars that are prone to damage, while some are rare or kept to the minimum. Premiums for cars that have higher insurance claim ratios are much expensive as compared to the rest.

Safety Features:-

Most newly manufactured cars come with a lot of safety features or with the option of adding them. They could be anything from safety airbags, advanced braking systems, locks, anti-theft devices, GPS tracking devices, etc. These features allow for safe driving and reduces the risk of damage and theft to the vehicle. If your car is fitted with these safety devices, car insurance companies can lower your premium rate to an extent. This is applicable as per the features listed in the Automobile Research Association of India (ARAI). At the most insurance companies can offer a 2.5% deduction on premium payment depending on the type of safety devices in your car.

Vehicles purpose:-

Cars can be used either commercially or personally. Insurance companies offer insurance to both commercial as well as cars for personal use. However, there is a difference in insurance premium charged especially if your vehicle is purchased for commercial use as insurance companies look at it as an investment that helps the owner earn an income.

Vehicle’s Engine Capacity:-

Most cars come fitted with either a V8 or a V4 engine. The engine in your vehicle plays a pivotal role in determining how much car insurance you will be paying. The V4 engine is not as powerful as the V8 engine and hence attracts a much lesser premium comparatively.

Driving Record:-

Insurance companies get information on risk drivers. Drivers records like drunk driving, rash driving, police record, accident record, and number of claims made are recorded. If the owner is a risk driver, then the insurance company charges a higher insurance premium as compared to the someone with a clean driving record.

Insurance Area/Zones :-

Insurance companies have predefined zones, termed as Insurance Zones. These are determined as per areas where vehicles are vulnerable to theft, damage, accidents or even forces of nature. If car owners happen to insure their vehicles in these insurance zones, they could be charged a higher premium. This is one reason why car owners living in urban areas pay a higher premium as compared to those living in rural regions.

There are also demographic factors that determine, how much car insurance you will be paying, for e.g.

Credit history:-

Most insurance companies today have access to your credit history/score maintained by CBIL. If you have a lower credit score, insurance companies charge you higher premium. Those with a healthy credit score pay much less in terms of yearly premium.

Profession:-

It may sound as an unlikely reason that determines your car insurance. However your profession plays a vital role. According to insurance companies car owners who need to use their vehicles to help them in their work e.g. marketing/sales professionals, work in a high risk environment. Hence they need to pay a much higher premium as those involved in low risk jobs like bank manager, doctors , etc.

There are several other factors that determine how much car insurance you will be paying, for e.g. marital status, age, gender, no claim bonus, add-on covers on your car insurance, etc.

Written By: PolicyBazaar - Updated: 15 July 2021
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