What Determines the Premium of Your Car Insurance Plan?

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Buying a car can often get confusing with the myriad options to choose from. But that is not all. You also need to purchase car insurance which is a requirement as per the law. Akin to selecting your car, there are plethora of insurance options that often make it perplexing decision. But once you know which policy is right for you, you can avail the best possible coverage. Before purchasing your car insurance online, you need to consider your requirement of the plan along with the premium. In effect, weighing the cost and the consequent benefits. This article sheds light on the various factors that determine the premium for your policy. 

Engine capacity

The engine capacity, also known as the cubic capacity, is the power output of the engine. It is the volume of the engine’s chamber. Thus, bigger the capacity, a larger quantity of air-fuel mixture can be compressed to produce power. Higher power number means higher risk for the insurance company. Hence, there is a direct relation of the cubic capacity with the premium of your car insurance policy. Third-party plans car insurance plans, that only offer coverage for third-party liabilities are based on this factor. When buying a third party car insurance online, keep in mind that your car’s engine capacity will affect the premium. 

Coverage of your insurance plan

Car insurance policies are available in two types—third-party plans or comprehensive policies. A third-party plan, as mentioned above, safeguards you from legal liabilities that may arise due to an accident causing injury to a third person or damage to their property. This is the minimum insurance coverage that you need to buy as per the Motor Vehicles Act of 1988. However, it isn’t the only available option. A comprehensive plan covers the advantages offered by the third-party plans in addition to own-damage cover. Here, the policy includes the cost of repairs for any damages to your car too. Since the coverage of these plans differ significantly, the premium is accordingly based on the selection of your policy. A car insurance premium calculator is a handy tool that help know the premiums of the policy based on your selection of policy features. 

Insured declared value

Insured declared value or IDV is the maximum amount that your insurance company compensates in the event of a total loss or damage to your car. Often confused with the resale value, it is the approximate valuation of the car. Comprehensive policies allow for you to set the IDV based on the requirement. Hence, higher the IDV, higher is the risk for the insurer thereby increasing the premium amount.

Add-on covers

Add-ons are optional policy features that can be opted alongside comprehensive car insurance policies. When you purchase a comprehensive car insurance, there are various add-ons that can be bought. Since they are over and above the coverage of your standard coverage, they increase the policy cost thereby impacting the premium. * Standard T&C Apply

Deductibles

Deductibles is that amount which you need to settle before the insurance coverage kicks in. All policies have a mandatory deductible known as the compulsory deductible. In addition to that, a voluntary deductible can also be opted for thereby further increasing the out-of-pocket expenses you need to pay for. Thus, the more you opt for a voluntary excess, the lower is your premium. * Standard T&C Apply

These are some factors that impact car insurance premiums. Also keep in mind that 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.