The car insurance industry has undergone a transformation due to digitization. Indian car insurance companies have also adopted digitization in order to serve their customers. Globally, technological advancements have enabled insurance companies to create personalized policies and charge premium accordingly. Internet of Things has made it possible for them to accurately gauge the risk profile of a driver based on several factors and charge appropriate car insurance premium. Car insurance in India hasn’t reached that level of digitization yet but is moving towards it at a steady pace. Currently, the cost of your car insurance policy in India is based on the following factors.
- Make-Model-Variant (MMV)
Your car’s make, model, and variant form the base of the car insurance policy. The cost of insuring a high-end luxurious car will be more than that of insuring a regular hatchback. The cost of insurance is dependent on the cubic capacity of the vehicle’s engine. Once the insurer knows the MMV, they can charge the premium according to its cubic capacity.
- Car’s Age
A car is a depreciating asset. This means that its value reduces with time. Thus, lower the value, lower the cost of insuring the car. This is why your car’s registration year is important for the insurance company.
- Locality
Where you drive your car also matters. If you drive your car in a city, chances of an accident are more as compared to driving in rural areas. Car insurance prices depend upon your locality, they are high in metro cities and low in tier 2 cities.
- Type of Policy
There are two type of car insurance policies, Comprehensive and Third-party Car Insurance policies. Car insurance prices are standard for a Third-party Liability policy but they vary as per the coverage offered by your Comprehensive Car Insurance policy. If you strengthen your Comprehensive Car Insurance policy with Add-ons, the cost of your policy is bound to increase.
- Deductible
Deductibles are of two types, voluntary and compulsory. You have the option of choosing your type of deductible while going for car insurance. Compulsory deductible is your share of the claim amount. You can increase it by opting for a voluntary deductible. This will reduce your insurance premium but will also reduce the claim amount.
- Claim History
If you have a bad claim history, the cost of insuring your car will be high. More number of claims means you do not receive a No Claim Bonus, which is a discount offered while renewing your policy. As a result, the cost of insurance is on the higher side.
- Insured Declared Value (IDV)
Some insurers let you choose your own IDV. IDV is the amount you will receive in case your vehicle suffers total loss i.e. it is stolen or damaged beyond repairs. It is not related to your car’s resale value. Higher the IDV, higher your car insurance premium. You can calculate car insurance premium amount using car insurance premium insurance calculator online in few simple steps.
Importance of Car Insurance
The Motor Vehicles Act, 1988 makes it mandatory for car owners to insure their vehicle in India. Driving without a valid car insurance policy is a punishable offense and can lead to penalties. Apart from the mandatory aspect, a Comprehensive Car Insurance policy safeguards you from financial losses by insuring your car against several perils. Thus, it is important to go for adequate coverage.
Make it a point to compare the coverage offered and not just the price while comparing car insurance policies. Ensure to check the exclusions and understand the terms and conditions of your policy before purchasing it. Note that an expired car insurance policy is of no use. Thus, keep renewing it from time to time. Drive safe and stay on the right side of the law.
