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Understand How Car Insurance Premium Varies as per Car Usage

Team AckoJun 14, 2021

When you buy a new car, you are obligated to get it insured. This is mandatory and a legal compulsion. The premium of the car insurance plan depends on many factors. Some of them include the type of vehicle, the type of policy, the age of the vehicle, etc. Take a look at this article to understand how your car insurance costs are calculated.

Calculating your Car Insurance Premium

Listed below are the main factors that matter when you calculate car insurance premium:

  • Type of vehicle: You need a different car insurance plan if your vehicle is used for a commercial purpose and a different plan if it is used for a personal purpose. Therefore, the type of vehicle, its make, and model, registration date, etc, plays a vital role when you use a car insurance calculator.

  • Type of policy: Next, we come to the type of policy. As we all know, car insurance is broadly segregated in two categories – third party and comprehensive. If you have a third party plan, your premium will be lower. If however, you opt for a comprehensive plan, you will have to pay a higher premium. You must, therefore, choose the coverage as per your requirements as it will affect your overall motor insurance costs.

  • Make and model: When you calculate car insurance premium, you will be asked about your vehicle’s make and model number. The costlier the model, the higher the premium will be. So a high-end SUV will have a higher insurance premium as compared to a small, hatchback car.

  • Age of the vehicle: IDV, or the insured declared value, is an important component used by a car insurance calculator. As your car ages, it drops in value. This affects the car insurance cover. So an older car with a higher IDV has a lesser car insurance premium.

  • Riders: Riders are add-on covers available with a basic car insurance plan. If you buy riders to get some additional protection, your premium rates will go up. You should, therefore, understand the scope of each rider and choose the ones that will offer the best value to you.

  • NCB: The no claim bonus (NCB) is a discount you earn for not making claims. This discount accumulates every year. If you have a lot of accumulated NCB, you will get a hefty discount on your car insurance premium.

  • Safety devices: Next, we have the all-important safety features. If you have an anti-theft gadget installed in your car, you will notice a difference when using a car insurance premium calculator. Cars that have these gadgets are safer and so the insurer may offer discounts on the premium. This is because there is a lower probability of the vehicle getting stolen and a claim being made thereafter.

  • Fuel type: Did you know that the fuel type of your car affects your insurance premium? Yes, that is correct. A car that runs or diesel or petrol is cheaper to insure, as compared to a car that runs on CNG. Do not forget to enter your fuel type on the car insurance calculator when you look to calculate the premium.

  • Your location: The location is also important here. People who live in rural areas or even in tier 2 or tier 3 cities need to pay a lower premium as compared to people who live in metros. This is due to traffic, pollution, etc. Since this is so important, make sure you enter your location accurately when you use a car insurance premium calculator before buying a plan.

The final word

Buying a good car insurance cover is vital. However, it is also necessary for you to find the right plan at the right price. So keep all the points mentioned above in mind and get set to own a great plan at a good price.

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