Premium is an essential consideration while availing motor insurance. It differs across insurers and depends on multiple factors. As a vehicle owner, it’s important for you to know what goes into calculating motor insurance premium and this article tells you the factors that influence it.
Insured declared value (IDV)In simple words, IDV refers to the market value of your vehicle. Thus, the more expensive it is, greater is the premium amount. When you buy a new vehicle, its market value is high. In such a scenario, the premiums are higher.
Also, note that vehicles of premium brands command a higher premium. Additionally, if you have any accessories such as an imported music system installed in your vehicle, it adds to the vehicle’s IDV, thus increasing the premium.
Engine sizeThe size of engine, measured in cubic capacity, fitted in your vehicle plays an important role in determining insurance premiums. Vehicles with a bigger engine size command higher premium than those with lower ones.
This is because big engine vehicles are expensive and are more prone to accidents. All of these increase premiums drastically.
Purpose of vehicleIt is another essential factor which influences more insurance premiums. If you intend to use the vehicle for commercial purposes, you need to shell out a higher premium. This is because the vehicle, in this case, is a source of income.
On the other hand, if you intend to use the vehicle for personal purposes, insurance companies charge lower premiums.
Geographical locationIt may come as a surprise, but motor insurance premiums are heavily influenced by where you live.
Note that for premium calculation India is divided into two zones – Zone A and Zone B. While Zone A comprises prominent metros including Kolkata, Chennai, New Delhi, Mumbai, Bengaluru, Hyderabad, Pune and Ahmedabad, Zone B covers the rest of India.
Generally, motor insurance premiums are higher if you happen to be resident of Zone A which experiences dense traffic, thus increasing chances of accidents. Also, if you happen to be an urban resident, you might need to shell out a higher premium as your vehicle is exposed to more risks.
Add-on coversYou can enhance your coverage through add-ons. There are several add-ons that you can opt for along with your motor insurance plan such as zero depreciation cover, engine cover, lock and key replacement cover, etc.
The premium amount is directly proportional to the number of add-ons opted for. It means higher the number of add-ons, greater is the premium.
With insurers embracing technology at a rapid pace, motor insurance premium also takes into account your driving behaviour. A responsible on-road behaviour goes a long way in reducing the premium amount in the long run.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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