With so many cars plying in India resulting in increased accidents every year, the importance of car insurance policies in India cannot be stressed enough. To be a legal driver in India, it’s mandatory for any new or used car to be covered under a car insurance policy. Besides meeting legal requirements, having car insurance is also beneficial to the policyholder as it covers any kind of expenses related to the car including theft, natural disasters, etc.
While choosing a car insurance policy, very often, the premium cost is the deciding factor. Have you ever wondered how the premium is determined? Continue reading to find out the key factors that impact your car insurance premium.
What is meant by car insurance?
A car insurance policy provides financial coverage for your car, for which a premium has to be paid to the insurance company on a yearly basis. Having a car insurance policy ensures that your car is protected against any kind of misfortune like natural disasters, thefts, accident expenses, etc. With road accidents on the rise in India, it is essential that one goes for a comprehensive car insurance policy for their car.
Additional Reading: Getting Started with Motor Insurance in India
Factors that affect Car Insurance Premium
Insured Declared Value/IDV
IDV implies the current market value of your car, which is normally fixed by the insurance provider. IDV relates to the current estimate of your car minus the depreciation value. Over time, the IDV of your car decreases due to the fall in the car value owing to it being depreciated yearly. Higher IDV garners higher car insurance premium.
Car Owner’s Driving History
The premium is also based on the car owner’s driving history in India. If the car owner has a clean and good driving record, then they get to enjoy reduced car insurance premium rates.
The class and model of the car also is also a deciding factor while calculating car insurance premium by the insurance provider. The premium for sports cars is generally higher due to the high-risk element involved compared to standard car models. Cars that have a higher cubic capacity or which run on gas or CNG also entail higher premiums.
The safety features of your car not only ensure the safety of you and your family members but also help in lowering your car insurance premiums. Safety features like efficient car lock or anti-theft system make you better eligible for a discount on your overall car insurance premium. Such safety features also ensure that when a theft is attempted or the car breaks down, through GPS you are alerted making it easier to track it. Safety features are thus considered important by insurance providers.
Insurance coverage is another key factor that decides whether the premium amount would be higher or lower. Normally, going in for comprehensive car insurance entails a higher premium, though such an insurance plan is considered very important as it covers all aspects of your car.
On the other hand, third party coverage is considered mandatory, though having collision coverage is not compulsory. Add-ons like a zero-depreciation cover, increased third party liability, protection of NCB benefit, etc also decide the insurance premium which would be charged.
Additional Reading: Types of Car Insurance Policies
Claim frequency is also a major factor that determines the amount of car insurance premium to be paid. If you have not made any claims throughout your annual policy year, then your insurance provider will give you a discount on the car insurance premium to be paid for the next year. This benefit is called the No Claim Bonus (NCB).
Additional Reading: How to claim car insurance?
These key factors would help you in evaluating how your car insurance premium gets calculated. It would also help you in making a better choice while purchasing a car insurance policy. Always be sure to read the car insurance policy documents carefully before signing on the dotted line.
1. What is the tenure of coverage for car insurance policies??
All car insurance policies have a validity of one year from the date of commencement in India. Car insurance policy needs to be renewed before the due date since many insurance providers do not offer a grace period for such policies. Even when your policy lapses by one day, your car would have to be taken for inspection by the concerned authorities or you may have to pay the penalties.
2. Do I lose the no claim bonus if my comprehensive car insurance policy lapses?
If your comprehensive car insurance policy lapses by greater than 90 days, then you will lose your accumulated no claim bonus.
3. On renewal, will I get to retain/carry forward my NCB, if I switch insurance providers?
Yes. In case you renew your car insurance policy with a different service provider, you still get to retain/carry forward the NCB accumulated on your previous policy. For availing of this facility, you will need to provide proof of the NCB earned/accumulated with your current insurance provider.
4. What is meant by policy endorsement?
Policy endorsement implies the written document from the car insurance provider ageing to the changes made in the policy. A policy endorsement gets issued when any change is made by the insured to an existing insurance policy.
5. If I lose my car insurance policy, can I get a duplicate copy?
Yes, if you lose your insurance policy, a duplicate policy can be requested. You will need to contact your insurance provider by submitting a written request for the same. A nominal fee for issuing a duplicate copy of your lost insurance policy will be charged by your insurance provider.