What Happens To Your Car Insurance Premium When Your Four-Wheeler Gets Old?

Selecting a car among the plethora of choices can often be a bewildering experience. While it is surely exhilarating, it also requires a thorough consideration of the purpose of buying a car and only then proceeding with the purchase. But the purchase journey does not end once you buy a car. You also need to comply with the Motor Vehicles Act that stipulates insurance as a mandatory requirement. Different elements of a car insurance policy impact its premium. Here are some of those listed below:

• Type of insurance cover

The primary factor impacting the premium rates is the type of insurance cover. The law requires third-party insurance to be mandatory; however, a comprehensive insurance plan is an optional upgrade that is available. Since the scope of each policy differs largely, the premium rates also differ. *

• Model and make of the car

Since every car model differs significantly, based on its dimensions, technical specifications, and even the kind of spare parts involved, there is a different risk that the insurer must undertake for each model. Hence, the model and make impacts the premium amount. *

• Modifications to the car

Modifications are changes that either increase the performance of the vehicle or are cosmetic in nature. In either case, it impacts the premium amount, since the insurer has to provide higher coverage for risks. *

• Policyholder’s driving experience

Personal factors are also essential in determining the premium calculation, such as driving experience, gender, and more. For instance, a 35-year-old person with more than 15 years of driving experience has a lower premium when compared to a 20-year-old with a newly issued driving licence. *

• Add-ons to the policy

Add-ons are additional policy features that enhance the policy’s coverage. The coverage of your insurance policy is directly proportional to the premium amount, hence impacting the premium calculation. *

• Deductible

A deductible is the amount which, you, the policyholder, must pay before the insurance coverage kicks in. Since it is an out-of-pocket expense, opting for a higher deductible will impact the premium amount. * * Standard T&C Apply

What is the impact on the premium amount when your car gets old?

The above mentioned factors are crucial in determining the car insurance policy’s insured declared value or IDV. This amount is the approximate value of your vehicle if sold in an as-is condition. As the vehicle becomes old, the IDV starts to decrease due to factors like depreciation lowering its value. Further, IDV is also the amount that the insurance company pays in the event of complete damage to your car. Thus, as the vehicle ages, a lower amount is required to be compensated by the insurance company. Thus, the own-damage premium goes on declining as the vehicle becomes old. However, Insurance Regulatory and Development Authority of India (IRDAI) revises the third-party premiums periodically, where they increase generally. So, at the time of car insurance renewal online, you might witness an increase in third-party premiums, if any revisions are made, while own-damage premiums keep declining. You can visit the official website of IRDAI for further details. * Standard T&C Apply Irrespective of whether the premiums increase or decrease, you must renew your car insurance policy periodically to ensure continued legal compliance and protection for the car. To determine how the different elements impact the premium calculation, you can make use of a car insurance premium calculator. 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.