8 Factors that Determine Your Car Insurance Premium

Getting a car insurance policy is a must. The insurance cover should not only be adequate but also affordable. It is possible to get a good coverage at a reasonable price, keeping a few factors in mind while doing so:

1. Type of coverage: Third party insurance is compulsory in our country. Along with that, own damage car insurance policies are also available.  The comprehensive car policies offer both the coverages. But as compared to a comprehensive car insurance policy, a third-party liability policy is cheaper. The premium is corelated with the coverage offered and hence increases in proportion to the latter. Add on plans are available to increase the coverage. 
2. Type of the car: The premium is dependent on the car’s basic composition, type, cubic capacity of the engine etc. Thus, premium for a high-end car model will naturally be higher than a basic model.
3. The place where it gets insured: As compared to smaller cities the cost of premium will be higher in bigger cities where the cars are more susceptible to damage due to the kind of urban set up. For this reason, cars owned in Metro cities carry a costlier premium coverage. 
4. Age of the vehicle: There are two things that need to be understood when it comes to the car’s age. One is the depreciated value- natural wear and tear of the vehicle over time and secondly the IDV-the roundabout current value of vehicle in the market. Old cars will cost less to get insured as their IDV is less and the amount of depreciation is more. This two are interdependent values and hence the premium of a new vehicle is more.
5. No claim bonus: If there has not been a claim raised during the previous policy period of the car, insurance company offers a discount on the premium while renewing a car insurance policy. It is important to keep this factor in mind before a claim is raised.
6. Voluntary deductibles: The policy holder can contribute a pre-agreed amount to the total claim if at all raised. This helps in reducing the premium amount since the policy holder is a co-sharer in liability. 
7. Add-ons facility: The car insurance policies offer add-ons by which additional security can be availed of at an extra cost. However, it is advisable not to add all of them and consider only the necessary ones. This facility is for more security purposes and hence the premium goes up while opting them. There is an engine protection cover, roadside assistance cover, zero depreciation cover and so on. 
8. Anti-theft device: The use of an anti-theft device which is certified by the Automotive Research Association of India, is gaining popularity among four-wheeler users. This helps in curtailing the cost of the car insurance premium.

All these factors surely help one decide about the policy before getting started with paying an annual premium amount.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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