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6 Things that Determine the Cost of Car Insurance

Team AckoNov 15, 2021

The price of a car insurance can differ from insurer to insurer. However, the basic factors which determine the cost of a car insurance policy remain the same. One such factor is the fuel type of a car. Petrol, diesel, and Natural Gas (CNG) are some of the popular fuel types in India. Here are the things which determine final price of a commercial vehicle insurance policy.

Things that Determine the Cost of Car Insurance

Things that determine the cost of car insurance

1. Scope of Coverage

Car insurance can be of different types based on the coverage offered. You can choose to buy coverage based on your requirements. Here are the things related to coverage which can affect the cost of your car insurance policy.

  •  Type of Policy

Car insurance is of two types – Third-party Liability and Comprehensive car insurance. Buying a Third party insurance is mandatory by law. However, the scope of coverage is insufficient for most people as it does not offer coverage for damages caused to the insured car i.e. ‘own damage’. Thus, the cost is low. On the other hand, a comprehensive policy offers both – third-party and own damage coverage. Thus, the cost is higher.

  •  Add-ons

Add-ons are additional coverage options which can be bought only with a comprehensive car insurance policy. One can customize a car insurance policy with Add-ons. Adding each Add-on to the policy increases the cost of the insurance policy.

2. Fuel Type

There can be a difference in the price of a car insurance policy depending upon the type of fuel the car is running on. Cars using diesel and CNG fuel types can cost more compared to those running on petrol for the same model.

There is a difference in the cost of insurance for the same model of cars but a different fuel type because the Insured Declared Value for those cars is different. In case of CNG fuel type, the cost of insuring the CNG kit itself will increase the overall cost of the policy.

3. Value of The Car

Insured Declared Value (IDV) of a car is a primary component for calculating the car insurance premium. IDV value is nothing but the approximate current market value of a car. Thus, if a car costs more, the cost of getting it insured will obviously be more.

4. Security Systems

The purpose of car insurance is a financial security during unfortunate incidents involving the insured vehicle. However, it does not imply that a car should not be protected with security devices at all. In fact, doing so is a good practice and is appreciated by most of the insurance companies. They give a discount on car insurance premium with anti-theft devices. Just make sure your insurer offers this discount by getting in touch with them.

5. Memberships

Certain associations enable their members to enjoy a small discount on their car insurance premiums. One such instance is being a member of the Automobile Association of India. This association is divided depending on the geographical location. For example, Western India Automobile Association, Automobile Association of Southern India, etc.

6. Driving History

Driving history will not have an impact if you are buying car insurance for the first time. The cost of car insurance will increase for those who have a raised a car insurance claim against their policy. However, if no claims are raised in the past, the policyholder will become eligible for a discount called as No Claim Bonus (NCB). This discount is cumulative in nature and increases with each consecutive claim-free year. NCB can reach and stay up to a 50% discount on car insurance premium and drops to zero when a claim is raised.

How to Calculate Car Insurance?

It is fairly easy to understand the price of your car insurance policy before buying or renewing car insurance. All you have to do is use the car insurance premium calculator. Many insurers have a car insurance calculator on their website.

Car insurance calculator is nothing but a web form which you need to fill with details related to you and your car. The calculation of your car insurance premium will be done automatically and an estimated price will be displayed. Refer to this estimate and decide if you want to tweak a few factors to increase or decrease the price.

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