Factors to determine your car insurance premium

After browsing through catalogues, visits to car showrooms, advice from friends, and a thorough check of your financials, you have finally zeroed in on the best car insurance you wish to buy. While coming to the consensus on best car insurance suitable for your car you would naturally have taken into account the insurance premium you pay that will depend on the model of the car, the security and safety features installed in the vehicle, the driver's profile and whether the car is for commercial or private usage.

According to automobile industry experts, so far the premium was focused more on the vehicle and less on the user. However, this is bound to change soon, as the premium will depend on the parameters that lower the risk. So, more user-specific factors which influence risk will be considered in future. The article provides you some factors that will impact the premium of your car insurance in the coming years and will help you choose the best car insurance suitable for your needs and requirements.

Distance Covered

The number of kilometres you add up each month will be an important determinant. It is because less travelling is directly rational to lower risk. So, if a car is driven less than 5 km a day, say, to drop your kid to school and back, it will be perceived to have lower risk than a vehicle that is driven about 50 km each day, say, to and from your office. A device called odometer has to be installed in the car to be able to track. It might take some time to include mileage as a factor for deciding the premium because the insurance companies are yet to work out the economics of this.

Credit history and behavioral patterns:

Internationally, insurance companies have linked credit history and customer behaviour to premium amount. A credit score means more authentic information about the individual's track record regarding payment and defaults. These credit score may be used in the next 2-3 years as insurers are still to develop better fraud control mechanisms. Behavioural patterns may be derived from choices made by the individual, such as the colour of the car.

City Choice

When it comes to the premium being determined by geography, currently, the classification is not too granular. As of now, it is divided into two zones — A and B. Zone A includes Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune, whereas the rest of India falls into Zone B. The vehicles in Zone A are considered to be more vulnerable to theft and accidents and, therefore, their premiums are higher. Ideally, the classification should be on the basis of cities and there should be demarcations within the city too.

Home ownership

Owning a house may help you get the best car insurance premium. Reason is simple; a home means you have parking vicinity. If it’s safe and sound it becomes an important parameter in deciding the premium rates. If taken into account, it can translate into lower rates for the customer. Other factors, such as car maintenance and driver's gender, will also be important. So, if you have been getting your car serviced at an authorized service centre and have been maintaining it properly, you may be able to get a discount on the premium.

Top-Ups

While these factors are yet to come into effect for calculating the premium, a multitude of add-on covers has been launched for creating the best car insurance policy for your car. Add-on covers bridge the gap between actual financial losses arising due to an accident and the amount covered in the base policy. However, such covers can increase the premium rates by 1-2% of the total sum insured.