Can Your Vehicle Type Affect How Much You Pay for Car Insurance?
The insurance policy for a car is a financial plan that protects you against the financial liabilities arising from the damage or theft of the car, injuries caused to you or damages to a third party. A motor car insurance policy is a deal between you and an insurance company.
In India, the purchase of car insurance is mandatory by law as per the Indian Motor Vehicle Act, 1988. And to make things easier, you can now buy insurance online for a car.
Two types of policies available in India
- Third-party car insurance: Third-party insurance saves you from financial liabilities arising from the damage, death or injuries caused to a third party or third-party property by your car. The insurance provider will compensate the third-party for disability, death, injury or property damage.
- Comprehensive car insurance: Comprehensive car insurance policy will provide you with the coverage for third party liability as well as damages caused to your car and the injuries caused to you during the accident. It also covers the theft of the car. A comprehensive car insurance policy offers extensive coverage and high benefits. You can further improve your coverage by including a host of add-ons like engine cover, zero depreciation cover, etc. with your car insurance policy.
Without the right knowledge, a lot of people make the mistake of ruling out insurance of a car as an unwanted expense. Many policyholders may either go for a higher deductible amount or a low coverage amount. This can happen because they are unaware of the different factors which affect their car insurance premiums. One of the pivotal factors determining your insurance policy premiums is the type of car you have.
Let us look at some aspects of your car that affect your car insurance premium cost.
Some factors about the car that can affect premium rates
Before we delve into the various aspects of a car, let us understand what Insured Declared Value is. Insured Declared Value, simply put, is the current market value of your car. It means that if you were to sell your car today, that is the value you will get for it. In motor insurance, IDV suggests the total sum assured you would receive in the event of theft or total loss (when repairs are costlier than the actual value of the car).
Now that we understand IDV let us look at how your vehicle type affects your insurance premium.
- Make and Model of the Car: Insurance companies determine the premium based on the make and model of your car. A luxury car or a sports car is costlier than your regular hatchback. Costlier the car, higher will be the IDV. Thus, higher-priced car models will have higher car insurance premium costs than lower-priced, more affordable cars.
- Fuel Type: An essential factor that insurance companies consider while checking the make and model is the type of fuel used by the car. The premiums for petrol, CNG and diesel cars are different. Car owners with a diesel-run car will have to pay more premiums than those which run on CNG or petrol. This is because diesel cars have a higher market value than petrol or CNG cars, increasing the IDV and thus eventually raising the car insurance premium.
- Safety: The vehicle’s safety rating is set as per
the different safety and anti-theft features like traction control,
airbags, automatic seat belts, tracking devices, car alarms, etc. anything
which increases the safety of your car.
Features that may reduce the chances of the vehicle being damaged in an accident can reduce the premium amount. A car rating high on safety will lower the chances of an accident, promising you good car insurance premium rates.
- Possibility of theft: Insurance companies rate cars based on their actual claims experience. Well-designed cars that are new in the market and currently in-demand are more likely to get stolen. These models are also considered expensive for repair if they’re damaged. Cars like these will come with high insurance rates. But, if the car already has anti-theft features or you choose to install some features, the premium price might come down.
- The age of the car: The moment your car leaves from the showroom, it’s value starts depreciating. As your vehicle ages, it’s market value falls, thereby reducing the Insured Declared Value. Thus, older cars will enjoy a lower premium than newer models.
- Engine’s cubic capacity: The cubic capacity factor is considered when you have opted for the comprehensive insurance of the car. The third-party insurance premium will be decided based on the car’s engine capacity. An engine with a high capacity of the car can fetch you high insurance policy rates.
- Usage of the car: Apart from these factors, depending on whether your car is private or commercial can also affect your insurance rates. When you use your car for commercial purposes, the possibilities of damage and repairs go up significantly. As a result, commercial car insurance is costlier than insurance for a private car.
Thus, it can be surmised that vehicle type does have an effect on the premium rates you pay. Different factors like the engine’s cubic unit, age, model, fuel type and whether the car is for private or commercial use will contribute to the car insurance premium. Hence you must research well before buying car insurance to understand the premium you will have to pay.