9 Factors Affecting Motor Insurance Premium

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Unlike other forms of insurance, buying a third party liability coverage in a motor insurance is mandatory under law. What you pay on your motor insurance premium depends not on one but on many variables such as age, sex, car model, type of coverage, deductibles, etcetera. Here are the key variables that affect the motor insurance premium.

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      1) Car Make, Model and Variant

      The car that is to be insured is perhaps the most crucial factor that decides how your policy will be priced. On the part of the insurer, premium signifies a proportionate value of the replacement cost needed in case the car gets stolen or is totaled in an accident.

      The obvious implication that follows is, the more expensive a car, higher the premium. Also, the more riskier a car, higher the premium. That is the reason SUVs have a higher premium than Sedans. In a somewhat parallel sense, a CNG fitted car needs you to pay a higher premium than a petrol/diesel car.

      2) Insured Declared Value

      Insured Declared Value is the current market value of your vehicle. As a convention, IDV keeps on decreasing as the vehicle ages and so does the annual premium. IDV depends not only on how old your vehicle is but also on how well you have maintained it.

      3) Type and Degree of Coverage

      As mentioned at the start of this article, having a third party liability coverage in a motor insurance is mandatory under law. However, there are other types of coverages in a motor insurance such as collision coverage. It is not mandate but ideally more useful to the insured. A comprehensive coverage consists both types of coverages.

      The cover can further be extended to the electrical and non-electrical accessories fitted in your car at an additional premium of 4% on its value.

      4) Deductibles

      Also known as Voluntary Access, a deductible is the amount the insured agrees to pay out of his pocket at the time of claiming a file. Assume that a person has opted for Rs 10,000 deductible on his policy. Now consider an eventuality wherein he had to incur a loss of Rs 60,000 as his car got wrecked against a tree.

      In such a case, his insurer is liable to pay him Rs 50,000. But why would anyone want to opt for a deductible? Well, that is because the higher deductible you opt for, higher discount you'll get on the premium.

      5) Anti-theft Device

      If your car is installed with an ARAI approved anti-theft device, you are entitled to get an additional discount (2.5% on the OD Premium). The reason is obvious, an anti-theft device makes your car less liable to theft and hence proves to be a less riskier deal to insurance companies.

      6) Discount

      Insurance companies offer an additional discount on premium to some professionals (Defense Personnel, Doctors and Govt. Employees). Members of the Automobile Association are also entitled to get such a discount.

      7) Claiming

      For every claim free year, the car insurance company rewards the insured with a percent discount on the renewal premium. This is called as No Claim Bonus (NCB) and it keeps on increasing every claim free year up to a maximum of 50% discount. NCB belongs to the owner and not the car and is transferable to another car or policy.

      In contrast, every time the insured makes a claim, the car insurance company penalizes him/her with a Loading Charge of 10-20%.

      8) Age and Sex

      For the insurer, the calculation is simple, the riskier deal you are, the higher will be your premium. That's why youngsters have to shell out a higher premium than grown ups and married couples. Behind the wheels, men have proven themselves to be a riskier deal than women. Thus, the insurers reward women a lower premium than men.

      9) Source

      The smartest way to save on premium is to buy the auto insurance online via portals like Policy Bazaar, after making a smart comparison between car insurance premium quotes from the leading insurers. An online auto insurance saves you time, money and a lot of effort.

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      #Rs 2094/- per annum is the price for third-party motor insurance for private cars (non-commercial) of not more than 1000cc

      *Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB. Actual time for transaction may vary subject to additional data requirements and operational processes.

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