Cars have become an integral part of our lives and are often one of the biggest purchases for most of us. Choosing the right car insurance is just as important as choosing your car. But making policy decisions is not easy. This can be challenging because there are options today with different prices and different damage ranges. Although many car owners tend to buy car insurance that’s cheaper, they often choose it because they lack knowledge about the components of insurance.
Therefore, it is always wise to compare car insurance plans before buying one. Third-party liability insurance is compulsory, but it is recommended that you buy a comprehensive policy or own damage-cover standalone plan.
Most insurance plans have a specific annual premium you must pay to renew the protection they provide. But you might often wonder why the premium amount changes every year, right? Third-party insurance premiums are decided by the IRDAI on an annual basis. Since the comprehensive insurance plans include several third-part add-ons, the premium rates are bound to increase.
Let’s take a look at why the premium for car insurance changes every year and how to make the right choice when renewing your insurance.
Why Do Car Insurance Premiums Go Up Every Year?
The main reason for the change in the premiums that you pay is because IRDAI changes the rates of third-party insurance every year. IRDAI decides the third-party insurance rates every year. It considers the claims raised by the policyholders & loss ratios for the insurers to decide on the premium costs.
Customers often get confused about the changing rates of the premium. Therefore, it is essential to understand the diverse components that make up car insurance premiums and the different factors that affect their value. The value of your four-wheeler insurance premium changes every year during the renewal period. However, there are several factors to consider when determining the cost of car insurance premiums.
Factors that Affect Car Insurance Premium
The following factors determine the cost of car insurance:
- Your claim history: Claim history is one of the top factors that determine your car insurance premium. If you have filed multiple claims in the past, you are considered to be a risky driver. So, your car insurance premium might increase. The total rate increase in premiums also depends on the degree of damage to the vehicle for which insurance is requested.
- Modifications to your car: You can add accessories to it to enhance its look and performance. However, these devices are believed to pose a hazard while driving or increase the likelihood of theft. Therefore, the premium may increase if modifications are installed on the vehicle. Also, some upgrades can increase the risk of accidents, therefore, your premium might rise.
- Geographical location: Where you live has a huge impact on the value of your premium. If your insurance company finds out that you live in a city or a place that is prone to accidents or theft, your vehicle is more likely to be damaged and your insurance premiums will rise.
- Insured Declared Value (IDV): The claimable value is generally the maximum claim the insurer has to pay in the event of a total loss. The higher the IDV, the more liability the insurer has to charge. As a result, four-wheeler insurance premiums are higher for cars with higher IDVs. It is thus recommended to compare car insurance policies before purchasing one for your car.
- Make and model of the car: The car you drive also has a big impact on your comprehensive insurance premium. The premium luxury car is more expensive than a small hatchback because it consists of expensive parts. So, if you have an expensive car, you will pay a higher premium for car insurance.
- Add-ons: Insurers offer various riders, such as roadside assistance, engine damage cover, medical cover, passenger cover, and more. The more add-ons you include in the policy, the more expensive your premium will be.
Therefore, four-wheeler insurance costs depend upon these factors.
How to Keep Your Car Insurance Premium Low?
Here are some ways you can lower your premium:
- Timely renewal: We recommend that you drive safely and keep your vehicle in good condition. The NCB (No-Claim Bonus) is an award your company gives you for every year with no claims. You can only take advantage of NCB if you renew your policy on time.
- Smart claims: You can lose your NCB if you file a claim. So, it is advisable not to file claims for minor damages to keep the NCB intact.
- Install anti-theft devices: Anti-Theft devices can help keep your vehicle safe. Many insurance companies offer discounts if you have installed devices certified by the Automotive Research Association of India (ARAI) in your vehicle.
- Avoid unnecessary add-ons: It is advisable to buy add-ons that you require. Each add-on that you include in the policy raises your premium. Therefore, include the add-ons that you think are essential for you.
It’s more important to have auto insurance that gives you optimal coverage than insurance that doesn’t cover you with minimal premiums. So, get auto insurance that fits your budget and provides the coverage you need. There are several reputable companies like Tata AIG that provide car insurance online. Do check them out to learn more.