Have you ever seriously, and sincerely, wondered how your car insurance premium is calculated? Any aspect of risk that can be linked to a loss and has credible, sufficient data establishing this direct relation, can be ordained as an evaluation factor. Hence, there are quite a few factors that insurance service providers have to consider before setting the exact premium rate.
Classification of the Risk Factors – or the underwriting factors
It is obvious that the actual underwriting parameters’ selection varies from insurance company to company. But, largely, all the different risk factors can be divided into under these fundamental categories-
Based on experience that is related to your claims history.
Related to the location, which is usually the place of registration. Apart from this, the neighborhood you will reside in will also affect the premium charged. If you will stay in an urban location, near the highway or a very populated site, count on your premium to be hiked. And if theft or crime rates are higher in your locality, it will also add to the premium rates.
Any modifications done to the vehicle, such as adding a set of alloy wheels or a music player, will also count and change the size of the cover.
Directly related to the vehicle, in the sense its make, engine capacity, fuel type, and all related matters.
Related to the profession of the driver. That means if you are a professional such as a doctor, soldier or charted accountant, or even a government employee, expect to be presented with more special discounts.
The Age of Your Car Really Matters
If you were wondering at the absence of any mention of the automobile’s age, here is where it makes a grand appearance—at the time of renewal.
At this stage, it is the age of the vehicle that primarily determines your cover. The age of the vehicle is not only used to determine the Insured Declared Value or IDV but also the premium you have to pay. Factors like car’s years of use, depreciation, or reduction in valuation, are applied to the ex-showroom price to calculate the IDV. Typically, the premium would decrease with the increasing age of the vehicle.
Here is a schedule of depreciation for arriving at a car’s IDV.
|Age of Vehicle
||% of Depreciation for calculating IDV1
|Up to 6 Months
|6 Months to 1 Year
This list is applicable only to vehicles up to five years of age. For older cars, their market value is taken as the IDV (depending on the manufacturer, car’s model and condition, and availability of the spares parts) and is calculated by mutual agreement between insurer and the insured.
It is critical to remember that other than these deciding factors, the motor insurance premium can be adjusted for any bonus or discount that the insurer is willing to offer. These benefits are often calculated only after the service provider has fixed a premium that they want to charge you. Here we explain the factors that influence the premium that you pay for your car.
Discount and Benefits you should check and compare
No Claims Bonus
At the mere mention of discount, the first name that crosses our mind is undoubtedly that of the No Claims Bonus. You are aware that you entitled to a No Claim Bonus or NCB. If you have not filed for claims then as a reward for driving carefully and practicing road safety, it is given to you.
Here is a table showing how NCB is calculated across the motor insurance industry.
|Claim Free Year
While NCB is the most known of all auto discounts, do not miss the several other discounts that may come your way. Added up they may easily amount to a substantial amount. All comprehensive policies offer myriad rewards for good claims history, with a discount on the premium that can be as much as 50 percent of the own damage premium.
With a good claims-free driving history, you can even choose a higher Voluntary Deductible amount. The deductible is an amount you need to pay before the insurer contributes the reimbursement of the claim. This amount reduces your premium typically between Rs 1,500-Rs 15,000 since the insurer is not going to pay this back to you. Your record may earn you a suitable discount on the deductible charged.
Do not forget to check for loyalty discounts if you are renewing your policy with your existing service provider.
There are also concessions available to policy holders with a valid membership of a registered automobile agency like Automobile Association of Upper India, Western India Automobile Association, and such.
In addition, installation of antitheft and safety devices approved by the Automotive Research Association of India or ARAI will earn you certain rebates.
The privilege of add-on covers— Additional riders to a standard insurance plan always hikes up the premium. But is smartly used, instead of being a waste of money, it acts a security blanket against factors such as depreciation deductions, which can be as high as 50 percent at times.
In such a scenario, a Zero Depreciation additional cover plan may come with a cost and but ultimately provide adequate coverage for eventualities. Why wait for the depreciation scare in value of the car to flare at the time of a claim. Just get the Nil Depreciation Rider in place and relax.
Be on your guard
Nothing comes easy. So there are always certain necessary cautions. Avoid policy lapses like the plague as they could automatically disqualify you from availing the discounts that you were eligible for.
And most importantly, ALWAYS compare prices before buying or renewing policies. That is the best way to get the best rates and discounts.
Citation: Indian Motor Tariff