Factors affecting the car insurance cost

FACTOR # 1

Value of your Car Insured Declared Value (IDV): Your insurance premium depends on a market value for your vehicle set by the insurer. It is known as Insured Declared Value or IDV. This IDV varies based on your car age due to depreciation as the value of your car get depreciated due to wear & tear with time. IDV Affects Your Premium Amount payable to insurance company. The lower the IDV, the lower is your premium and in similar way the higher the IDV, the higher is your premium. If we opt for a lower IDV, but doing so might result in a lower claim amount for your policy. If the damages incurred to your car are more than the IDV, that you declared, you may have to pay the difference from your pocket.

FACTOR # 2

Type of Car Insurance: Not every vehicle insurance policy offers the same coverage. It depends on the type of insurance policy you buy for your vehicle. In India there are two main kinds of car insurance policies:

1. Third-party Car Insurance: A Third-party Policy is one of the most basic type of insurance policy. It covers such as, the injuries caused to another person and his/her damaged property. This type of insurance policy has the lowest premium. Purchasing the third-party car insurance policy is mandatory by Indian law.
2. Comprehensive Car Insurance. This type of policy covers all kinds of damages related to your car, another person’s property, and the insured car's owner-driver. Cause of damages can include Collision, Theft, Fire, Sabotage, Natural occurrences or Man-made calamities.

Since Comprehensive Car Insurance offers more coverage than a Third-party Insurance, it costs also increases and subscriber need to pay more premium. Your basic Comprehensive Car Insurance premium consists of Cost of Third-party Cover, Cost of Own Damage Cover, and Personal Accident Cover for the owner

FACTOR # 3

Add-on Coverage: In order to increase the protection of four-wheeler, various offers are made with the help of Add-ons. As the number of Add-ons on your auto insurance policy increases, so the higher the car insurance premium. Add-ons will give an extra layer of buffer to your Comprehensive car insurance policy. You can choose from a different types of Add-on to make your motor car insurance cover extensive. Need to ensure that you buy only those Add-ons that will add value to your policy. The 5 most common Add-ons are

1. Zero Depreciation
2. Engine protection
3. NCB protection
4. Invoice Cover
5. Roadside Assistance

Zero Depreciation or Bumper to Bumper Add-on: It is an Add-on to a Comprehensive Car Insurance Policy. If you opt for this add-on cover, your insurer will not take depreciation into account at the time of a claim. It has the highest premium as compared to a Third-party Liability and Comprehensive Car Insurance Policy. Unlimited claims are allowed under the Benefit Zero Depreciation.

Why Zero Depreciation Add-on? The value of your motor or automobile decreases with time. This is called depreciation. Insurance company pays a portion of the bill and the remaining amount is deducted on the account of depreciation. If subscriber avails this add-on, then insurer will pay the maximum payable amount of the whole bill without considering depreciation.

Engine Protection Usually: damage to the car’s engine is not covered under a regular Comprehensive car insurance policy. An engine is the most important part of a car, also most expensive. Hence it is important to cover your car’s engine under your car insurance policy. You can do so by purchasing an Engine Protection Add-on.

No Claim Bonus (NCB) Protection: No Claim Bonus is offered by Insurance companies, in case you do not raise a claim against a Comprehensive car insurance policy during the previous policy period. While renewing the policy this discount can be availed. However, if you raise a claim then the insurance company will not offer the NCB. But there is a way out. You can get benefit by purchasing the NCB protection Add-on and your NCB will remain intact even if you raise two claims during the policy period.

Invoice Cover: This Add-on is popularly known as Return to Invoice cover or Invoice Protection Add-on. The purpose of this add-on is that in case your vehicle undergoes total loss or is stolen; your insurer will provide you the amount mentioned in the invoice as compensation. If this Add-on is not availed then you will be offered the Insured Declared Value of your car in case of a total loss or theft.

Roadside Assistance: This Add-on comes extremely handy in case you need the services of a mechanic in the middle of your journey. When subscriber avails with a Roadside Assistance Add-on, all you have to do in such a situation is call your insurance company and they will send help right away.

FACTOR # 4

Your Car’s AgeThe Insured Declared Value or IDV depends on your car’s value. However, the value of your car reduces every year. So, the older a car is, the lower is its value. This can lower your premium and the sum assured. Hence we can say, age also makes a car riskier and more vulnerable to damages. Car insurance companies often check your car’s health while deciding the premium.

FACTOR # 5

Extra Security Features: One of the easiest ways to reduce your four-wheeler insurance premium is by installing anti-theft and other security features. This is because insurance companies are in the business of lowering your risk. The lower the risk, the lower is the price of your premium.

FACTOR # 6

Your Claim History: Car insurance companies reward those subscribers those who do not claim.This is done through a ‘No Claim Bonus’ and is in the form of a discount on your insurance premium. No Claim Bonus reduces your car insurance cost.