Factors That Impact Motor Insurance Premiums

Motor Insurance

It is common knowledge that motor insurance policies are mandatory for all vehicle owners. The Motor Vehicles Act has laid down this requirement making motor insurance a prerequisite to drive a vehicle legally in India. When shortlisting an insurance policy, the premium plays a key role. Whether you buy motor insurance online or offline, it is one element that influences your purchase decision. But what is it that impacts the premium of a policy? Before that, let’s look at what is exactly meant by premium –

The premium of a policy is the price that is paid to acquire insurance cover for your vehicle. Depending on the various features of your insurance plan, the premium differs. Here are some of the different elements that in combination impact your motor insurance premiums –

Insured Declared Value

Insured Declared Value or IDV is present value of your vehicle after accounting for depreciation. It is the maximum amount that the insurance company pays in the event of complete or total damage. Since it is the amount which the insurance company pays as compensation, it also impacts the premium directly.

Coverage opted for

The next factor that impacts the premium is the coverage opted for your vehicle. Motor insurance plans are available in two types – third-party policies and comprehensive plans. As the name suggests, a third-party plans are the ones that protect against legal liabilities payable to third persons in the event of an accident or damage. These premiums for these plans are set by the regulator, the Insurance Regulatory and Development Authority of India (IRDAI). On the other hand, comprehensive policies are the one that provide coverage not only for such third-party liabilities, but also for own damage to your vehicle. Since these comprehensive policies have a broader scope, the premium is dearer as compared to a third-party policy.

Add-on covers

Add-on riders are an extension to the above-mentioned comprehensive plans. These are additional features that are optional at the time of purchase. When buying a comprehensive policy, buying add-on covers can help to customise the coverage as per your need. Since they are optional features available to buy, they impact your premium. So, make sure to use a bike or car insurance premium calculator before finalising your choice of add-ons.

Usage of the vehicle

The premium of your policy is also based on whether the vehicle is registered for private use or commercial use. Whether it is private or commercial vehicle insurance online, the premium is based on it. Since commercial vehicles involve higher risk, the premium is expensive for commercial vehicle insurance for the same vehicle type.

Location of registration

The registration of your vehicle also determines the premium rates charged. The premiums are classified in two zones – Zone A comprising of eight metro regions like Kolkata, Chennai, New Delhi, Mumbai, Bengaluru, Hyderabad, Pune and Ahmedabad and Zone B for the rest of the country. So, depending on the location of registration, the premium is levied.

Apart from the above factors, the engine capacity is also another factor that impacts your premium which can also be notice for third-party premiums wherein the price is charged based on specific slab of engine capacity. Keep in mind these factors and then make a choice of your insurance cover. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.