Factors That May Affect Your Car Insurance Premium

In India, motor insurance is compulsory by law. In addition to this, car insurance is also vital for personal safety and increasing cost of claims. However, car insurance can be quite pricey and the large premiums can burn quite a hole in your pocket. By understanding the factors that affect premium, you can choose the best car insurance policy for your needs that not only protects your finances but also ensures the safety for your precious asset. Here are a few factors by which customer can manage the premium of their motor policies as per their requirement. Type of Car Insurance and Add-on Covers The customer has to decide the type of car insurance he wants to opt for. There are two basic types of car insurance covers which include: Third Party Car Insurance: This is compulsory by law Package Policy: Own Damage + Third Party Liability + Personal Accident Also under of package policy, the customer can opt for add-on covers (Additional coverage provides added financial protection) in lieu of extra premium. Example: If the insured has installed accessories, then the Insurance of Accessories can be opted for by paying additional premium. Electrical/Electronic Fittings Electrical/Electronic items that are additionally fitted (not included in the manufacturer’s selling price of the vehicle) can be insured at an additional premium of 4% on the value of such fittings. Use of CNG/LPG fuel Any vehicle fitted with an RTA approved CNG /LPG kit, can be insured separately at an additional premium @ 4% on the value of the kit.   Based on the IDV IDV means Insured's Declared Value. It is the current market value of your vehicle. The IDV is fixed on the basis of the manufacturer’s listed selling price of the particular model at the commencement of the policy or renewal and adjusted as per the depreciation in the tariff. For vehicle aged over 5 years, the IDV will be the value agreed between insurance company and insured The Insured’s Declared Value (IDV) of the vehicle will be the ‘SUM INSURED’ for the purpose of tariff calculation and it will be fixed at the commencement of each policy period for each insured vehicle.  

VEHICLE	% OF DEPRECIATION
Not exceeding 6 months	5%
Exceeding 6 months but not exceeding 1 year	15%
Exceeding 1 year but not exceeding 2 years	20%
Exceeding 2 years but not exceeding 3 years	30%
Exceeding 3 years but not exceeding 4 years	40%
Exceeding 4 years but not exceeding 5 years	50%

  Depreciation is also applicable upon car parts while availing compensation for repairs. Opt for a zero depreciation car insurance cover and receive full payment for all required expenses.   Deductibles and Voluntary Excess Voluntary excess is an option that allows you to bear a certain amount of loss from every claim. For this option, you are eligible for a discount on Own Damage Premium (ODP). Deductibles play a major role in premiums. If a customer chooses higher deductible, it means a lower premium. On the other hand, if insured chooses a lower deductible, it means a higher premium.

VOLUNTARY DEDUCTIBLE	DISCOUNT
INR 2,500	20% on the OD Premium of the vehicle, subject to a maximum of INR 750/-
INR 5,000	25% on the OD Premium of the vehicle, subject to a maximum of INR 1500/-
INR 7,500	30% on the OD Premium of the vehicle, subject to a maximum of INR 2000/-
INR 15,000	35% on the OD Premium of the vehicle, subject to a maximum of INR 2500/-

  No Claim Bonus (NCB) If insured maintains a claim-free record, he accumulates the No Claim Bonus. This then translates into discount on the Own Damage Premium. An insured becomes entitled to NCB only at the renewal of a policy after the expiry of the full duration of 12 months.

ALL TYPES OF VEHICLES	% OF  DISCOUNT ON OWN DAMAGE PREMIUM
No claim made or pending during the preceding full year of insurance	20%
No claim made or pending during the preceding 2 consecutive years of insurance	25%
No claim made or pending during the preceding 3 consecutive years of insurance	35%
No claim made or pending during the preceding 4 consecutive years of insurance	45%
No claim made or pending during the preceding 5 consecutive years of insurance	50%

  Anti-theft Devices If the insured installs anti-theft devices, approved by the Automobile Research Association of India (ARAI), he or she gets additional discount on the premium. The amount of discount is usually 2.5% of the premium to a maximum of INR 500. The price of motor insurance is constantly on the rise. By understanding the different factors that affect car insurance premiums, you can reduce the sting of the high prices and find the best car insurance policy for your needs. This article was authored by Namrata Porwal, Health Administration Team (HAT), Bajaj Allianz General Insurance Co. Ltd.