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What Are The Factors Considered By Car Insurance Company To Determine Premium?

Published On Jul 12, 2021

Read this article to find out about the different factors that are considered by your insurance company to determine the cost of your car insurance premium.

Car management is an expensive business. Insuring your vehicle with the best car insurance plan protects you from any financial liabilities that may arise as a result of an unfortunate event such as a car accident, natural disaster, man-made disaster, theft, or third-party liabilities. A car insurance policy can be obtained by paying a premium. A premium is simply the cost of a car insurance policy. Your car insurance premium is affected by a variety of factors. In this article, we will go over each of these factors in depth.

What Are The Factors Considered By Car Insurance Company To Determine Premium?

What Are The Factors Affecting The Cost of Car Insurance Premium?

Car insurance providers or companies use criteria and algorithms to calculate premium costs based on your personal information and company claim data. Knowing the factors that influence your premium rates will allow you to make an informed decision when purchasing insurance. These are the factors that influence the premium-

  • The Car's Model

The manufacturer, type, and cubic capacity of your car's engine, among other factors, will have a direct impact on your car insurance premium. This is primarily due to the fact that your insurance premium is determined by the value of your vehicle, which is referred to as the Insured Declared Value (IDV). Aside from the IDV, the car's size and engine capacity are important factors in determining insurance costs. The lower the premium, the larger the car.

  • The Car's Age

The age of the vehicle is primarily used to calculate depreciation and insured declared value (IDV). Depreciation is the decrease in the value of any commodity or asset caused by natural wear and tear over time. The IDV is the car's current market value. An older car will have more depreciation and less IDV, implying that the insurance premium will be less than that of a new car.

  • Registration Location

The location is regarded as an important factor in determining the insurance premium. If the car is used primarily in an urban setting, the premium costs are higher because accidents are more likely to occur in urban areas. Driving a car in a tier 3 city or a semi-rural area, on the other hand, is considered less dangerous. As a result, the premium for driving your car in such areas will be lower.

  • Insurance Types and Add-Ons

In India, having basic third-party insurance for your car is required by law. It provides coverage against third-party liabilities but no protection for the policyholder. A comprehensive car insurance policy protects you as well as third-party liabilities. These policies can be improved with the assistance of add-ons. Third-party insurance is less expensive than comprehensive coverage, but it leaves the policyholder uninsured. Adding add-ons raises the premium price. The cost of the premium rises as the level of coverage increases.

  • No Claim Bonus 

Insurance companies will give you a discount on your premium if you do not file a claim during the policy year. Before filing a claim, double-check your NCB component to see if it is absolutely necessary.

  • Modifications to Your Vehicle

Because of cutting-edge technology, customising your car to your liking has never been easier. Different types of modifications will have varying effects on your premium cost. Modifications that improve security will lower the premium, while modifications that improve the appearance and performance of the car will raise the premium. To avoid having your insurance claim denied, make sure you notify your insurer of these changes.

Take Away

The cost of car insurance is an important consideration when purchasing or renewing coverage. Make sure you purchase a policy with a low premium and adequate coverage. Insurance is not a requirement, but rather a plan that assists you in dealing with any financial liability. To avoid unnecessary extra costs, make sure you purchase your car insurance from a reputable insurance provider or company.

Also read 

Parameters To Consider While Purchasing Car Insurance In India

How To Renew Oriental Car Insurance Plans?

Disclaimer: This article is issued in the 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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