9 Key Factors Affecting Motor Insurance Premium in India

Posted on: Feb 18, 2020 | 3 mins | Written by: HDFC ERGO Team

9 Key Factors Affecting Motor Insurance Premium in India

Motor insurance is insurance for your vehicle that has been deemed mandatory by the Indian Government. According to the Motor Vehicles Act of 1989, all types of motor vehicles, like cars, commercial vehicles, jeeps, and motorbikes, have to be insured.

Importance of Motor Insurance

There are several reasons to ensure that your vehicle is covered by comprehensive motor insurance. Some of them are as follows:

Lack of roadway infrastructure especially within cities

In case of any accidents, it covers the damages, thus taking care of liabilities

If you choose the right policy, it also covers hospitalisation

In case of demise, the right policy also covers the family

9 Factors Affecting Motor Insurance Premium

While buying car insurance, the person should keep the major influencing factors affecting third party car insurance premiums in making his own decisions to purchase it. The following could be nine crucial factors:

1. Type of Vehicle:

The make, model, and age of the vehicle determine the premium precisely. Typically, luxury and high-performance cars have high premiums as they take more time and money into the repair process.

2. Insured Declared Value:

The value declared to the insurance company, i.e., IDV, is the most prominent sum assured that the insurer pays to the insured in case of total loss. Generally, if IDV is higher, the premium is also higher.

3. Driving History:

If driving history shows no claims made, a policyholder gets lower premiums and, on the other hand, policyholders with a history of accidents are likely to incur higher premiums.

4. Place of Residence:

Premium prices hinge on the location in which one resides. Urban areas usually are characterised by higher traffic congestion and theft incidences; thus, premiums are often higher than those in rural area settings.

5. Age and Gender:

Young drivers and male drivers generally have a higher premium because statistical data reflects a greater occurrence of accidents in these groups.

6. Claim History:

As a result, if an individual frequently claims on the insurance policy, then it results in a higher premium since insurers would consider such individuals to be high risk.

7. Type of Coverage:

Insurance for third-party liability is less expensive than comprehensive car insurance.

8. No Claim Bonus:

Insurers give discounts on premiums when they stay claim-free for years.

9. Add-ons and Riders:

With add-on options like complete depreciation coverage or roadside assistance, one has to pay a higher premium.

Therefore, these factors can assist the customer in selecting the right kind of policy and managing the third party car insurance effectively.

Legal Needs

Simply put, if you get motor insurance, you are safeguarding yourself from legal implications. As per the Motor Vehicles Act of 1989, motor vehicle owners must insure their vehicles against accidents and third-party liabilities. Thus, get insured and save yourself from the legal hassles.

Types of Motor Insurance

1. Comprehensive Motor Insurance

As the name suggests, it is inclusive insurance that covers damages incurred during accidents, third-party liabilities, natural calamities, terrorist attacks, theft and fire, to name a few. This coverage can be enhanced with a few add-ons like Zero Depreciation (which ensures the value does not go down with the depreciated vehicle), engine protection, tyre protection and roadside assistance.

2. Third Party Motor Insurance

In insurance terms, you are the first party in the insurance policy if you own the vehicle. If you happen to meet with an accident that involves another person, then that person is the third party to whom you’ll be liable to pay damage charges. The third party motor insurance covers claims for this loss and damage.

Conclusion

It is better to be safe than sorry. Secure yourself with iron-clad motor insurance and protect yourself in the case of a mishap that not only impacts your wallet but your peace of mind as well.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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