Factors Affecting Car Insurance Premiums in India
1. Vehicle-Related Factors:
- Make and Model: High-end, luxury, and sports cars generally have higher premiums due to their higher Insured Declared Value (IDV) and expensive repairs.1
- Insured Declared Value (IDV): This is the current market value of your car. A higher IDV leads to a higher premium. IDV decreases with the car’s age due to depreciation.
- Age of the Vehicle: Newer cars typically have higher premiums than older cars (up to a certain point) due to their higher IDV and potentially costlier repairs.
- Engine Capacity (CC): Cars with higher engine cubic capacity (CC) often attract higher premiums. Diesel vehicles may also have slightly higher premiums than petrol or CNG vehicles due to their higher cost.
- Fuel Type: As mentioned above, diesel and CNG vehicles can sometimes have different premium rates compared to petrol cars.
- Safety Features: Cars equipped with safety features like airbags, ABS, and anti-theft devices (certified by ARAI) may qualify for discounts, thus lowering the premium.
- Modifications and Accessories: Aftermarket modifications can increase the car’s value and risk, leading to a higher premium.
2. Policyholder-Related Factors:
- Age and Gender of the Driver: Younger drivers and, statistically, young male drivers are often charged higher premiums due to a higher perceived risk of accidents.
- Driving History: A clean driving record with no prior claims or traffic violations can make you eligible for lower premiums and No Claim Bonus (NCB). A history of accidents or claims will likely result in higher premiums.
- Location: Premiums can vary based on the city and even the specific area where the car is registered. Metropolitan cities and areas prone to accidents or theft often have higher premiums.
- Marital Status: Some insurers believe married individuals are more responsible drivers and may offer slightly lower premiums.
- Occupation and Income: While less common, some insurers might consider your profession or financial history as indicators of risk.
- Claim History: Frequent claims in the past will lead to higher premiums upon renewal.
- Credit Score/Financial History: Some insurers might consider your credit score as an indicator of your likelihood to pay premiums on time.
3. Policy-Related Factors:
- Type of Coverage:
- Third-Party Liability: This is the basic mandatory cover and has the lowest premium.
- Comprehensive Coverage: This covers both third-party liability and damages to your own vehicle, resulting in a higher premium.
- Add-on Covers: Opting for additional covers like Zero Depreciation, Engine Protection, Roadside Assistance, etc., will increase the premium.
- Deductibles: A deductible is the amount you pay out-of-pocket in case of a claim. Choosing a higher voluntary deductible can significantly lower your premium.
- No Claim Bonus (NCB): For every claim-free year, you accumulate an NCB, which offers a discount on your renewal premium (up to 50%).
- Policy Tenure: Multi-year policies might offer a slight discount compared to annual renewals.
Tips to Reduce Car Insurance Premiums in India:
- Compare Quotes: Always compare insurance plans from different providers online before buying or renewing. Premiums and coverage can vary significantly.
- Choose the Right Coverage: Evaluate your needs carefully. If you have an older car, a third-party policy might suffice. Avoid unnecessary add-ons.
- Increase Voluntary Deductible: Opt for a higher deductible if you are a confident driver and can afford to pay a larger portion in case of a claim.
- Maintain a Clean Driving Record: Drive safely and avoid traffic violations to be eligible for lower premiums and NCB.
- Don’t Make Small Claims: Avoid claiming for minor damages as it can affect your NCB and increase future premiums.
- Install Anti-theft Devices: Installing ARAI-approved anti-theft devices can sometimes fetch you a discount.
- Renew On Time: Renew your policy before it expires to avoid losing your NCB and potential higher premiums for a break in coverage.
- Utilize No Claim Bonus (NCB): Ensure you claim your NCB during renewal. It increases with each claim-free year. You can also transfer your NCB when switching insurers.
- Review Your Coverage Annually: As your car ages, you might want to adjust your IDV or remove certain add-ons to reduce the premium.
- Consider Usage-Based Insurance (Pay-as-you-drive): If you drive less, some insurers offer policies where the premium is calculated based on your mileage.
- Bundle Insurance Policies: Some insurers offer discounts if you buy multiple policies (e.g., car and home insurance) from them.
- Join Automobile Associations: Membership in associations like the Automobile Association of India (AAI) might offer discounts.
- Look for Discounts: Ask insurers about any available discounts for professions, senior citizens, or specific car features.
- Avoid Unnecessary Modifications: Modifications increase the car’s value and risk, leading to higher premiums.
By understanding these factors and implementing these tips, you can make informed decisions and potentially reduce your car insurance premiums in India. Remember that the cheapest policy might not always be the best; ensure it provides adequate coverage for your needs.
