Factors That Affect Four Wheeler Insurance Premium

So, you have finally bought your dream car. You have insured it as well. You finally drive your car down to your office to share this pleasant news with your colleagues and friends. Just then a friend of yours asks you about the premium you pay every month. And when you share, he reveals that his premiums are comparatively lesser in price. Both of you have bought a car at similar times but you end up wondering how the difference in premiums stems in the first place.

It’s simple. Car insurance prices are not generic. Meaning, insurance companies do not offer a one-size-fits-all policy to their customers. A lot of factors go into consideration that directly affect or influence how much you pay as a premium for your car’s insurance.

To give you a quick idea, here are some of the most prominent factors considered.

Car Type

The make and manufacturer of your car are important factors that affect your car insurance premium. Car insurance companies maintain a separate report of claim ratios of diverse car manufacturers and their models. This is a crucial factor as car models with more claims ratio usually tend to have higher premiums.

Also, high-end and luxury cars have a significantly high four wheeler insurance premium when compared to their mid-range and low-end counterparts.

Apart from this, your car’s fuel type and accessories (or modifications) also affect your premium rates. Your insurance premium is likely to be higher if your car runs on diesel or CNG. As far as modifications are concerned, they are generally not included in an insurance policy. And you would end up paying more if you intend to insure them as well. This includes spoilers, rails, paint job and more.

Insured Declared Value

Your car has a market value set by your insurer. This is called an Insured Declared Value or IDV. Due to the regular wear and tear of spare parts and your car caused by ageing, your car loses its market value with the passage of time. This in-turn reduces your car’s IDV.

This IDV has a direct influence on your four wheeler insurance premium. The more your car’s IDV, the higher the insurance premium.

The general formula to determine your car’s IDV is this –

Insured Declared Value = your car manufacturer’s listed price or selling price – your car’s depreciation.

To the formula, add the costs you incurred in getting car accessories to your car’s selling price if you have modified your car.

To help you understand better, here is a table that shows in detail the depreciation percentage with respect to the increase in the car’s age.

Car’s Age Depreciation % < 6 Months 0 6 Months – 1 Year 5% 1 – 2 Years 10% 2 – 3 Years 15% 3 – 4 Years 25% 4 – 5 Years 35% 5 – 10 Years 40% > 10 Years 50%

Location Of Registration/Zone

Where you live or buy a car immensely influences your four wheeler insurance premium. If you live in a zone or city with prominent traffic, you are more likely to pay a higher premium. That’s why premiums tend to be higher in metropolitan and tier-2 cities, where traffic is usually high.

Type Of Coverage

The type of insurance policy you have availed for your car has a direct impact on your insurance premium. If you have chosen a basic car insurance policy like third-party insurance, your premium will be low. And if you choose a comprehensive four wheeler insurance with add-ons to ensure maximum risk coverage, you are bound to pay a higher premium.

Additional Covers

Also called add-ons, these are additional benefits you attribute to your car insurance for maximum benefits. Generally, add-ons address specific and unique aspects of car protection that are not included in an insurance policy. If you opt for engine protector, personal baggage protection, key and lock protection, 24/7 spot assistance and more to your car insurance, your premium will be higher.

No Claims Bonus

A No Claims Bonus is also known as an NCB. This is offered by your insurance company as a reward for not availing an insurance amount for a specific period of time. Depending on your insurer, this duration varies. This bonus only increases with the increase in the number of years you haven’t claimed any insurance. And this bonus can fetch you discounts on your four wheeler insurance premium, thereby decreasing the price you pay every month.

For instance, if you don’t claim insurance for two consecutive years, you are likely to get a discount of up to 25% on your insurance premium. To get an extensive idea about No Claims Bonus, check out the table below.

Claim-Free Years Discount One 20% Two Consecutive 25% Three Consecutive 35% Four Consecutive 40% Five Consecutive 50%

Voluntary Excess

Voluntary excess is when you step forward to pay extra for your car insurance to share a portion of your car’s risks. In voluntary excess, you voluntarily pay excess to your car insurance policy so that when you have to make a claim, this amount is deducted by your insurer and the remaining amount of your claim is taken care of by your insurance company. This is otherwise called deductibles. For instance, let’s assume you buy car insurance online. When buying you have paid a voluntary excess of Rs. 4500. Now when the value of your claims is Rs. 9000. Your insurance company will bear the half of the value and you the other half. The benefit of availing a voluntary excess is it allows you to get discounts on your car premiums. So, depending on this, your four wheeler insurance premium would be higher or lower. Depending on how much you have paid as an excess voluntarily, you are eligible for a specific discount slab. The table below gives you a holistic view of this.

Voluntary Excess Discount Rs. 2,500 20% discount on premium (up to Rs. 750) Rs. 5,000 25% discount on premium (up to Rs. 1,500) Rs. 7,500 30% discount on premium (up to Rs. 2,000) Rs. 15,000 35% discount on premium (up to Rs. 2,500)

Anti-Theft Features

Anti-theft features include any security systems or digital locks installed for an added layer of your car’s security. When you have such accessories installed, your four wheeler insurance premium is more likely to go down.

Special Discounts

There are several discounts which you can avail from your four wheeler insurance provider. When you avail such discounts, your premiums are bound to reduce comparatively. With Bajaj Allianz, you can avail the following discounts when you -