Mumbai is notorious for its traffic woes where you have to spend hours commuting from one place to another. Innumerable cars ply on Mumbai roads worsening the traffic conditions. If your car is one among them you should know that the Motor Vehicles Act 1988 mandates a compulsory insurance coverage on your car. Moreover, it should be renewed every year for a valid cover. Adding the burden of premiums to the common man’s already stretched budget, especially in an expensive city like Mumbai, is enough to spell distress. But before you shell out your money on the car insurance premium won’t you want to know how it is calculated? What are the factors which determine the premium you are paying for availing insurance on your car? Let’s find out -
Insured Declared Value: Insured declared value also called as IDV in short, the value is substantial in shaping the premium rates for a comprehensive policy. The technical definition of the term is the current value of your car after the adjustment of depreciation. The amount is the estimated value of the vehicle which will be payable if the vehicle is completely damaged with no chances of repair. IDV decreases over time because of vehicle’s wear and tear. Higher the IDV, higher will be your premium amount.
Must Read - know your IDV in car insurance
Area of registration: Mumbaikars will have to shell out a higher premium compared to those living in Nagpur or Patna. For ascertaining the premium, India is divided into 2 zones – A and B. Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune fall in the Zone A category where the premium is higher because of increased volume of traffic which increases the chances of accidents while other cities fall in the Zone B category where premiums are lower.
Other fittings: You might have installed a GPS device in your car or a music system, the cost of which was not included in the showroom price of the car and as such increases the value of your car. Naturally, the corresponding premium amount will also increase for installing such fittings.
No Claim Bonus: Just like your health plan, you also earn a No Claim Bonus if you do not make any claim in a previous year. Contrary to health insurance, the bonus in car insurance discounts your renewal premium. So the rate of accumulated No Claim Bonus also affects the premium rate which you pay for your car.
Must Read - No Claim Bouns
Voluntary Deductible: IRDA has mandated a compulsory deductible limit in your insurance policy whereby in case of any claim, the amount of the deductible will have to be paid by you. In addition to this limit, you may choose an excess amount to be paid by you in case of a claim. Higher the amount chosen lower will be your premium as the voluntary excess is inversely proportional to your premium rate.
Premiums charged by companies may vary but you now know the elements which decide your premium amount which would help you to settle for the best plan.