Home Finance What you should know about car insurance companies and premiums

What you should know about car insurance companies and premiums

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In India, four-wheeler insurance is mandatory. It is one of the documents you should always hold while driving a vehicle, along with your driving license, vehicle registration certificate, and PUC certificate. While the government may have made buying car insurance compulsory, it protects your legal and financial liabilities and should opt for it voluntarily.

However, no two insurance policies are the same. Have you ever compared your insurance policy with someone else’s and thought why the premiums differ? Well, it could be owing to the following reasons:

Living in densely populated cities

The place where you reside plays an essential role in deciding the premium against the car insurance policy. If you live in metro cities, where there are more vehicles, chances are your insurance premium could be high. A high ratio of four-wheelers brings higher chances of thefts, accidents, and other unpleasant scenarios. Meanwhile, if someone is living in a smaller town, the risks of accidents and threats are lower, which reduces the premium.

Higher IDV

Insured Declared Value is defined as the maximum amount paid by insurance companies when you file a claim. It is simply the current car market value, calculated by factoring in depreciation. When you buy offline or online car insurance, you have the right to declare a higher IDV, which thereby results in higher premiums. However, opting for higher IDV can prove highly beneficial when filing an insurance claim for incidents like theft, damage in accidents, and so on.

Buying more add-on covers

When you buy a car policy, the insurer may convince you to buy several add-on riders. Of these, some may or may not be worth the investment. Every add-on rider comes with a price tag, and the more riders you buy, the higher the premium payable. As such, you should be selective about the add-on riders if you do not want the premiums to be too high.

Inadequate driving history

The four-wheeler insurance companies are rigid when it comes to the buyers driving history. Your premium could be high if you get caught in accidents often, leading to filing claims. Owing to the claim filing frequency, the insurer might consider you a ‘high-risk driver’. The more the claims, the more the insurance premiums. Your premium also increases if you are arrested for driving under the influence of alcohol or drugs or breaking traffic laws.

Buying policy via the broker

When you get the policy from a broker, you must pay a commission or a fee. This is called a brokerage charge. This amount gets calculated in percentage and could be high. However, you could avoid paying any brokerage fees at all and buy the car insurance online, directly through your insurer’s portal.

All the mentioned reasons result in higher premiums. If you seek to reduce them, ensure you follow the conditions concerning car insurance renewal, as mentioned in the policy agreement. You can earn high discounts for not filing claims during the renewal period.