Usually, a car insurance policy costs about 1 to 2% of the value of your car. If you are paying way more than this amount, you need to read through your car insurance policy.
But before you take a look at your policy, here are a few things which might be the reasons you are paying a higher car insurance premium:
Reason #1: You do not know why you need an insurance policy
No, you should not be buying a car insurance policy only because it is mandatory by law. Your car insurance policy can be customized as per your specific needs. When you first bought your car, you might have paid for a cover suggested by your car dealer without giving much thought to the coverage. To avoid paying more car insurance premium, try to list down your needs by asking yourself the following three questions:
- Do you often travel in your car with family or friends?
If yes, buy a Passenger add-on.
- Do you live in a flood prone area?
If, yes buy a comprehensive car insurance policy.
- Do you own an expensive car?
If yes, buy an Engine Protection add-on.
Reason #2: You are buying add-ons you don’t need
Now that you’ve understood from the above-mentioned point that buying add-ons is necessary, keep in mind that going overboard can also increase the cost of your car insurance policy. If your policy has a Passenger add-on and you often travel alone, it is an unnecessary expense.
Review your car insurance policy and cut down on the add-ons you do not need. Also, buying covers like Zero Depreciation, Roadside Assistance, or Invoice Protection Cover for a car that’s more than 5 years old might not be a good idea as most of the insurers do not offer coverage for these. Again, only buy covers which you require.
Reason #3: You have not installed an anti-theft device
A comprehensive car insurance policy offers theft coverage. Which means your car insurance company will compensate you in case your car gets stolen. However, your insurer will appreciate it if you take preventive measures like installing an anti-theft device on your vehicle.
Some insurers make it a point to offer a discount for those who install an anti-theft device. If you go ahead and install this device in your car, make sure that you get in touch with your car insurance provider and inform them about the installation.
Reason #4: You are raising claims for small damages
Comprehensive Car insurance policy is supposed to be an extended layer of financial protection in case of damages caused to your car. Your insurer will bear the cost of repairs in such a situation. However, if you do not raise a claim against your car insurance policy, you are given a discount on the premium during the renewal of your policy.
The no claim discount is cumulative in nature i.e. it increases with each consecutive claim-free year and can reach up to 50% on the cost of your car insurance policy. It is called a No Claim Bonus. As soon as you raise a claim, this discount will straight away drop to zero, making your policy costlier at the time of renewal. Thus, avoid making claims for damages which you can afford to repair.
Reason #5: You have set the wrong IDV
IDV i.e. the Insured Declared Amount. It is the approximate market value of your car. When you buy a comprehensive car insurance, you will be asked to set the correct IDV for your car as it is one of the main factors for determining the cost of your car insurance policy.
While buying or renewing the policy, set the amount approximately equal to the current market value of your car. Setting a higher IDV in car insurance will result in an expensive policy. Also, setting a lower IDV will result in a lower claim amount in case of damages.
The Bottom Line
Consider the above-mentioned factors for reducing the cost of your car insurance policy. Do not forget to read the terms and conditions before making a purchase.
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