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5 Reasons Why You’re Paying A Higher Car Insurance Premium!

Published On Nov 12, 2019, Updated On Jan 08, 2020

Here is why you are paying a higher insurance premium for your car than others!

Car insurance premium is directly related to the coverage the policyholder chooses. The premium amount would increase in respect to the higher risk coverages. Besides coverage, It also depends on several factors that affect the premium of the car insurance policy. Sometimes, we can see two different policyholders pay a different premium amount for the same car for the same plan because they live in different cities. Driving history is another factor which affects the car insurance premium amount among other things.

In this article, we discuss the factors due to which some policyholders pay a higher car insurance premium that others for a similar policy.

5 Reasons Why A Policyholder Is Paying A Higher Car Insurance Premium

A car insurance policyholder might end up paying a higher premium amount because of these following factors:

Driving Location

Driving location is one of the most essential factors in deciding the car insurance premium. If the location is one of the metropolitan cities, the amount would be higher. The reason is - as the ratio of the cars is higher, risks like accidents, thefts, are also higher. Whereas, people living in small towns or suburbs face fewer accidental risks. Thus the premium amount is also lower in other cities than in the metropolitan cities.

IDV or Insured Declared Value

IDV is the maximum insured amount which the insurance company agrees to pay as a reimbursement to the policyholder. In other words, IDV is the current market value of the insured’s car which has to be paid by the insurance company considering depreciation on the basis of the car's age and the manufacturer’s present value as per the Indian Motor Tariff, 2002.

IDV has a direct relationship with the Own Damage premium of a car insurance policy. If you declare a higher IDV, you will end up paying a higher premium amount and vice versa. A lower IDV will help you to save the premium amount, but in case of unfortunate events like accidents, thefts, you will be reimbursed with a more moderate OD coverage, which may turn into a financial burden for you. Thus, you must also get an accurate IDV declared at the time of purchasing a policy.

Selected Add-ons

A policyholder can choose car insurance add-ons as per his/her requirement in case of a comprehensive or standalone own-damage car insurance policy. If a policyholder is looking for a package with several customizations like engine protection coverage, passenger coverage, roadside assistance cover and more, the premiums will be higher in comparison to a policy cover with less or no add-ons.. However, an excellent customized policy is required if you own a luxury car and do not want to face any financial loss because of it.

Non Installation of Anti-theft Devices

Car insurance companies pay a compensated amount if the car is stolen. But, if the car is protected with an ARAI (Automotive Research Association of India) approved anti theft device, it will less vulnerable to theft. Thus, a policyholder pays a higher amount of premium as the chances of theft will be more in case of absence of the anti-theft devices. Moreover, the car owner can get a discount of 2.5% (up to Rs. 500) on the premium amount on installing ARAI-approved anti-theft devices.

Driving History

Car insurance companies give rewards to the policyholder who asks for less claim. At the same time, policyholders with a bad driving history are ended up paying a higher amount of premium than others. This happens because they are tagged as “high risk driver” and they tend to ask for more claims. However, paying fines on time for past events is also taken into consideration.

The Bottom Line

One should keep in mind the above-mentioned factors while purchasing a policy to ensure he/she does not pay a higher premium than the required amount. While some of the deciding factors are beyond control, there are some more that a policyholder can modify to lower the rate. Thus, you must be aware of the factors which significantly affect a car insurance premium so that you fetch the best deal for yourself.

For further reading:

7 Factors that Affect Car Insurance Premium

Disclaimer: This article is issued in general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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