There has been much speculation regarding whether the cost of motor insurance policy premium would rise or fall. Previously, there was anticipation that the premium amount would be lowered as the IRDAI indicated that it might discontinue setting the yearly premium for third party insurance.
Recently there were doubts regarding a proposed hike in the third-party insurance premium amount for the fiscal year of 2020-2021. However, owing to a sharp dip in the renewal and purchase of new third-party insurance plans, the providers collectively decided to enforce no hike in third party insurance. Thus, policyholders will continue to pay the same premium for their vehicle.
While such speculations are still at large, several other factors continue to influence policy buyer’s premium. Having an idea about them helps to determine and manage insurance premium better.
Factors that affect car insurance premium
These are among the most noteworthy factors that affect car insurance premium –
- Policy buyer’s driving record
Individuals with a clean driving record are more likely to avail a motor insurance policy at a lower premium. Generally, those who have had a record of serious traffic violations or have been into multiple accidents are likely to pay a higher premium. Those without any driving record, i.e., new drivers, may have to pay a higher insurance premium as well.
- Type of car
The cost of the vehicle and its engine type also helps decide the four-wheeler insurance premium. Generally, cars that run on diesel attract a higher premium than the petrol counterparts.
- Age and gender
Age and gender are important determinants of policy buyer’s risk profile when it comes to driving. For instance, a mature driver is more likely to have a record of fewer accidents when compared to less experienced ones. Furthermore, as per statistics, women are less prone to get into car accidents than men, helping them secure better insurance policy premiums.
- Frequent use of the car
The more one uses a vehicle, the more they are exposed to the threat of car accidents or damages. This, in turn, drives the cost of third-party motor insurance up.
- Policy buyer’s credit profile
Policy buyer’s credit score helps determine their ability to pay the motor insurance premium on time. For instance, individuals with a higher CIBIL score have a better chance of receiving extensive coverage against a lower premium.
- Type of insurance policy
The premium cost is often based on the type of motor insurance policy, i.e., a third-party or a comprehensive cover. Typically, a comprehensive insurance policy costs more than third-party coverage.
Furthermore, the amount of deductibles may also impact one’s premium amount. It is best to find out about them from respective policy providers before selecting a suitable policy plan.
- Extent of coverage
Factors like co-payment percentage also influence the premium account. In most cases, paying a high amount to account for an accident or third-party damage from own pocket helps avail an insurance policy at low premiums. Individuals may compare online motor insurance policy plans to understand how coverage impacts premium cost.
The policy buyer’s location comes in handy to decide the risk of theft, vandalism, and accidents the vehicle in question is exposed. Individuals based in rural areas and small towns are considered less exposed to such threats and hence may avail an insurance policy at a lower cost.
Most insurance providers tend to categorise towns and cities into Zone A, B and C. Zone A cities usually include metropolitan centres, such as Delhi, Mumbai, Bengaluru, Kolkata, etc. Zone C, on the other hand, would include smaller towns and villages.
Furthermore, new policy buyers should not select a motor insurance policy simply based on its premium cost. They should check out the extent of coverage, terms to make a claim and claim settlement percentage to make an informed choice.