What Factors Affect Car Insurance Premiums – [Explained]

  • By: InsureJournal
  • Date: December 24, 2021
  • Reading Time: 3 min.

If you are opting to buy a car, you might also consider buying insurance for it. The insurance will cover the risk of damage caused by theft, vandalism, or any natural disaster. As you buy an insurance premium, it will take care of all the probable financial losses that might happen to you regarding your car. Such insurance will also provide you with the peace of mind that you desperately need in this modern damage-prone lifestyle. However, if you are buying insurance, you should consider some of the factors that affect the premium value. If you take these factors under your consideration, you are well on the way to buying your desired insurance.

Factors that affect your car insurance premium

1. IDV or Insured Declared Value

Insured Declared Value or IDV refers to the amount which reflects the current valuation of your car in the market. The insurer company arrives at this market value after deducting the depreciation value of your car. Since the depreciation value keeps getting higher in course of time, the IDV also keeps getting lower. As a result, your car’s insurance premium will also be less due to the lower IDV. However, if you are buying the insurance for your expensive car, the premium will cost very high since the Insured Declared Value or IDV is on the higher side.  

2. Owner’s Driving Record 

It is a very obvious fact that the insurance provider will look into your driving record. If your record is not very satisfactory, i.e. you tend to be involved in accidents often, then the company will demand a high premium value to carry the risk of damage for your car. So, if you want to keep the premium value as low as possible, make sure to drive safe and have a clean record.   

3. Make and Model of the car

If you are driving a sports car that is clearly more likely to face damages here and there, then you might also expect a very high price for your car’s insurance premium. However, the insurance premium for standard cars with average speed is much less. The cubic capacity of your car also plays a role in determining the premium value. The higher the cubic capacity, the higher the price goes. And if your car runs on gas or CNG, then you are most likely to pay more as an insurance premium. 

car insurance premiums factors

4. Safety Features 

If your car has an efficient locking system or it has an anti-theft system installed, then you are likely to get a discount on your premium value. In this modern era, many cars come with an alarm that goes on if any attempt of theft is made. Besides, there is modern technology like GPS to track down the location of the car in case of such occurrences. These modern features help lower the insurance premium of your car. 

5. Type of Coverage

Another important factor that goes into consideration for determining your car’s insurance premium is the kind of coverage you want. A higher premium value is needed while opting for comprehensive car insurance. But it is also important to know that comprehensive car insurance is essential and a secure way to cover your car’s damage. The price of the insurance premium goes up if you include some of these add-ons – 

  • Collision Coverage
  • Zero Depreciation cover
  • Towing cost
  • Increased third-party liability
  • Protection of NCB benefits and so on.

6. Frequency of claims 

If you don’t make any claim throughout the annual policy year, then you are likely to get a discount in the premium value for the following year. This reward is termed as ‘NO CLAIM BONUS’ or NCB benefit. 

Hopefully, now you have a clear idea of the factors that affect the price of your car’s insurance premium. It must help you buy the best insurance policy. You might help your friends and the people you know to buy the insurance premium that is compatible with their requirements. Also, make sure to understand the language of the policy properly to have clarity on your decision.    

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