6 factors that affect car insurance rates

According to the Motor Insurance Act, vehicle insurance is compulsory for every auto owner. In general, a car insurance premium is based on three factors: personal accident cover, own damage, and third party damage.

Feb 23, 2016 09:02 IST India Infoline News Service

According to the Motor Insurance Act, vehicle insurance is compulsory for every auto owner. In general, a car insurance premium is based on three factors: personal accident cover, own damage, and third party damage. It can be tempting to select lower coverage while purchasing a car insurance policy. But, one must examine all factors before purchasing a vehicle insurance policy. For example, auto insurance is also affected by various factors and knowing what affects your premium can help you make a more informed decision while buying a policy.

 

Some tips while purchasing a vehicle insurance policy

 

l  Model, engine, and age of the car

 

If you have an expensive sports car or a lavish vehicle, then the premium amount will be higher. Imported models also involve higher insurance premiums. That said, if your car is embedded with anti-theft features, the premium amount could reduce to an extent.

 

Insurance premiums vary depending on the engine type. The premium will be higher for third-party coverage if the engine displacement is higher.

 

The premium for own damage coverage is inversely proportional to the age of a car. However, the cost to replace a new car is higher than the one to replace an old car.

 

l  Vehicle purpose

 

Purpose for using a vehicle, commercial or personal, also affects insurance premium rates. If the vehicle is used for commercial purposes, then the premium rates shoot up.

 

l  Location of the insurance

 

The location of the registration office where you covered your vehicle is an important factor that determines the insurance rate. India has been categorized into two zonal areas for the purpose of rating:

 

Zone A: Mumbai, Delhi, Chennai, Pune, Ahmedabad, Bangalore, Kolkata, and Hyderabad

 

Zone B: Rest of India

 

The insurance rates in Zone A locations are higher compared with Zone B because the risk of accident in metros is more compared with the rest of the country.

 

l  Age of the driver

 

Some insurers’ premiums differ based on the driver’s age. Younger drivers would have to pay lesser premium compared with older drivers.

 

l  Driving record

 

Experienced driver with a clean driving record enjoys better rates. However, if you have records of careless driving, then the auto owner needs to pay higher car insurance premium.

 

l  No claim bonus

 

Most insurance companies offer a no claim bonus to auto owners, who have a no claim record to their credit. Such policyholders are given around 30%-50% rebate on their premiums.

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