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A car insurance policy offers the much-needed financial protection in case an unfortunate incident were to occur. Your third-party car insurance policy will not only provide coverage against property or vehicle damage but also offer coverage in an event of death or injury of any third-party involved.

In order to avail of the benefits of a car insurance policy, it is necessary to pay a certain premium. Many individuals are unaware of the factors involved while arriving at the premium cost. You may check your car insurance details to identify the cost that you are paying towards premiums.

Following are some major determinants of car insurance premium rates.

  • Insured Declared Value (IDV)

  • IDV is referred to the market value of a vehicle. In an event of total loss or damage to your vehicle, your insurance provider is liable to pay the IDV amount. Higher the IDV, higher will be the premium cost.

  • Brand and type of the car

  • High-end expensive brand cars attract a higher premium value as the cost of repairs will be higher in case of an accident. Besides, certain cars such as high-end sedans or Sports Utility Vehicles (SUVs) also attract a higher premium amount.

  • No Claim Bonus (NCB)

  • As the name suggests, NCB is a certain discount that you become eligible for, in case you do not make any claims in the policy year. You may, therefore, avail of such discounts offered by your insurance provider and lower your premium amount to a great extent. It is important to note that the insurance provider will view your vehicle insurance policy details, especially your claim record before offering an NCB.

  • Car features

  • Modern cars come equipped with latest technological features such as advanced braking systems, airbags, anti-theft devices, and robust locks, among many others. In case your car is fitted with features that are included in the list approved by the Automobile Research Association of India (ARAI), you may enjoy a discount of up to 2.5% on your premium cost.

  • Location of the registration office

  • The location of the registration office where you covered your vehicle plays a vital role in determining the premium cost. Zone A locations have a higher premium price as the risk of accidents in the metropolitan cities is quite high. These include Mumbai, Ahmedabad, Kolkata, Chennai, and Bengaluru, among others.

  • Credit score

  • Your credit score plays an important role in determining the premium cost. Credit score provides the insurance company a way to determine how financially responsible you are. By maintaining a good credit score, you may enjoy a discount of up to 25% on your premium cost.

    Some of the other important aspects that have an impact on your premium cost include the age of the car, your vehicle condition, and your driving record, among others. You must take such factors into consideration and enjoy the most competitive rate.

  • Written By: Mehul Shah, Executive Vice President & Appointed Actuary

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