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Feb 11, 2023

Find Out the Factors That Determine Motor Insurance Premiums

Motor insurance acts as protection against your vehicle under unexpected circumstances. Taking care of your vehicle can get tedious and often the repairs are expensive and impact your financial planning. Instead, if you have insurance coverage for your vehicle, you are relieved that your vehicle is protected against any unexpected circumstances. When you decide to buy motor insurance, you are required to pay a premium for the coverage of your vehicle. Ensure the IDV is set right so that you do not have to bear any expected expenses for the repairs of your vehicle. There are several policies available from which you can choose based on your needs.

Factors that determine the premium of your motor insurance

If you are in doubt about the premium amount, knowing the factors that determine your premium amount will provide you with clarity.

1. Types of motor insurance

The premium of your vehicle insurance depends upon the type of motor insurance you choose. Having third-party motor insurance is mandatory by law. However, buying comprehensive insurance is optional. If you want to protect your car and not worry about the expenses it incurs, you must buy a comprehensive car insurance plan. In comparison to a comprehensive insurance plan, the premium of third-party insurance is relatively lower.

2. Purpose of the vehicle

When you buy vehicle insurance, a key factor that determines the premium is the purpose of your vehicle. For example, if you have a bike that you use for your personal needs, you will simply require a personal bike insurance plan. However, if you are buying a vehicle for commercial purposes, you will have to buy a separate commercial vehicle policy. The reason why there are these two types of insurance is that usually commercial vehicles are much more exposed to risk than personal vehicles. Also, if you have a commercial vehicle, the premium is likely to be higher than that of personal insurance plans.

3. Age of the vehicle

If a vehicle is usually less than five years, it is considered a low-risk vehicle. The higher the age of the vehicle, probably the more maintenance it needs. This is because the more the age of the vehicle, the more its value depreciates.

4. The capacity of the engine

The type of engine and its capacity also plays a critical role in determining the amount of your premium. For example, if you have a vehicle that runs on diesel, the motor insurance premium for it is likely to be more when compared to a vehicle that runs on petrol. The simple reason is diesel vehicles are more expensive than petrol ones. The capacity of the engine is referred to as cubic capacity (CC). It reflects the total power produced by your vehicle engine. The CC of your vehicle is one of the key components that help the insurer determine your premium. The higher the CC of your vehicle, the more expensive your premium is likely to be.

5. Add on coverages

Along with the standard comprehensive motor insurance plan for your vehicle, you can also choose add-on covers to protect your vehicle. There are several add-ons that you can choose from depending on your needs. Since they are an optional coverage that can be bought, you are required to pay an additional premium for them based on your needs.

6. Policyholder’s financial history

The financial capability of the policyholder also impacts the premium of the policyholder. The insurance company may consider your credit score to get an estimate of your financial history. It helps the insurer to determine your capability of paying the required premium on time.

7. History of driving

If you have a good history of driving, you are considered a low-risk prospect for the insurance company. Your premium is likely to be lower than an individual who does not have a good driving history. If you have a good driving history, you can also try to negotiate the premium amount with your insurance provider.

8. Location of registration

Your location directly impacts the risks that your vehicle deals with on an everyday basis. The premium rates for vehicles in metro cities are different than the ones who live in tier 2 or tier 3 cities. Usually, metro cities are considered high-risk locations compared to small cities. Thus, the registration location of your vehicle plays an essential role in determining the premium of your vehicle insurance. You must compare several vehicle insurance plans before buying one. Also, you must read the fine print of the policy to avoid any problems at the time of claim.   Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.  

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