All about Car Insurance Rates & Factors Affecting it!

The overall car insurance rates we pay are affected by varied factors. While some factors that affect car insurance rates are within our control, some are beyond. Nonetheless, being aware of what affects our car insurance rate can help us make a well-informed decision when purchasing insurance.

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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

Here are some of the most prominent factors that car insurance companies take into account when computing car insurance rates:

Factors Related to Demographics

Age and gender:

Usually, young drivers under 25 years of age are required to pay more as compared to drivers over 25. Further, young males between 16-25 years typically have to bear higher insurance rates than young women. This is because it is statistically proven that male teenagers get involved in accidents more than their female counterparts.

Good students are sometimes offered a discount on car insurance. This proves to be one of the best ways to get cost-effective car insurance for under-25 males.

Mature drivers generally pay less than younger drivers. Studies show that when compared to older men, older women get involved in more minor accidents. Hence, older men usually get better car insurance rates, provided they have a good driving record. However, the difference in premium costs is usually not too much.

Location:

The area one lives in also affects the car insurance rates to a large extent. A densely populated area crowded with cars increases the risk of accidents, collisions with injuries, etc. Some areas have high theft rates, while in some areas car repair costs are higher. If your car is parked in a secure location such as a garage, it is less likely to be stolen or damaged; hence you can get lower rates.

Marital Status

It is seen that married people generally tend to have fewer accidents. Therefore, married people, men especially, get comparatively lower rates. The rate decrease is also tied to the person’s driving history – for a married man with a clean driving record and who has never been in an accident, the rates could be nearly halved.

Credit Score

Several insurance companies consider an individual’s credit score when determining car insurance rates. 

In general, a good credit score means a lower premium and vice-versa. It is, therefore, important to ensure that you have a good (and error-free) credit score.

Profession

Car insurance companies may draw correlations between a person’s profession and the resultant risks of accident, and they adjust the premium accordingly. Paramedics, insurance underwriters, police officers, are some professionals who often receive a good rate when they need car insurance, because they are observed to be drivers who are more careful when driving.

Factors Relating to Car

Safety features

A car’s safety rating is based on safety and anti-theft features like airbags, traction control, seat belts/automatic seat belts, car alarms, anti-lock brakes, tracking devices, etc. that make your car relatively safer, less likely to get into an accident, and harder to steal.Since a car with a high safety rating lowers the chances of theft/injury/accident, you get a lower insurance rate.

Read More: Factors Affecting Car Insurance Premium in India

Car Size and Age

It is believed that larger cars are generally safer than small cars. Therefore, many large cars with good safety ratings fetch lower premiums as compared to smaller cars with similar safety ratings. Interestingly, cars with engines that are larger relative to body size tend to have higher insurance rates.

Although repair costs for older and newer vehicles are similar, the former is more likely to be wrecked in an accident. Naturally, the cost of major repairs for an older car is often higher than a new vehicle. Therefore, insurance rates for older cars are high as compared to the newer ones.

Possibility of Theft

Insurance companies rate the model and make of a vehicle according to their actual claims experience. Swanky cars are more likely to be stolen and are expensive to repair as well. Quite expectedly, such cars attract higher insurance rates. However, if the car is equipped with anti-theft features, the premium reduces.

Factors Relating To Driving

Driving Records

If you have been involved in accidents (usually at-fault accidents) or have other blemishes on your driving record, your insurance premium will automatically be higher. Further, if you have made car insurance claims earlier and require car insurance a second time, the insurance company would charge you higher rates, as they believe that you are more likely to file another claim than a similar driver with a clean driving record. Some insurance companies completely refuse to give insurance to those with bad driving records.

Driving Activity

The more time you spend driving on roads, higher are your chances of getting into an accident. If you live closer to your work place, you will most likely have a lower premium compared to a person whose home and workplace are far apart and/or someone who has to use his/her vehicle to commute to work regularly.

Some companies alter car insurance rates based on the distance driven, purpose and frequency of usage of the car, etc. Factors like how much, where and when you drive, whether you use your car more for business or pleasure, can also affect insurance rates.

Key Points to Remember

To save further on your vehicle insurance costs, you can increase your deductibles, i.e., the out-of-pocket amount you pay on collision and comprehensive claims, because higher deductibles mean lower premiums. Theft deterrent systems are also a good idea (after checking with your insurance company which safety systems qualifies for a discount) to avail the dual advantage of being safe and enjoy lower insurance premiums.

Each insurance company applies discounts differently; hence you must ask your insurance company about any discounts that you may qualify for when figuring out how to decrease car insurance rates. Car insurance forms a major part of the cost of owning a car; therefore, anything you could do to lower the premium rate is beneficial for you.

Written By: PolicyBazaar - Updated: 15 July 2021
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