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How to Cut Down Your Car Insurance Premium?
- Author :
- TATA AIG Team
- Published on :
Despite the many benefits of purchasing a four-wheeler insurance plan, most people consider it an unnecessary expense. People think that to avail of the best 4-wheeler insurance policy, they will have to shell out a high premium.
If you too are concerned about the monetary aspects of car insurance, rest assured. There are various ways in which you can bring down the car insurance premium and buy a low-premium car insurance plan that fits your budget.
Car Insurance Premium Meaning
Car insurance is essentially a contract between you, the policyholder(first party), and the insurance provider (second party) wherein the insurer provides a specific coverage to your insured car in exchange for payment. The amount you pay to the insurance company to buy the four-wheeler insurance policy is called the car insurance premium.
Factors that Impact Car Insurance Premiums
If you have ever wondered ‘Why is my car insurance premium so expensive?’, check out the following factors that impact car insurance price and can lead to a higher premium:
- Prevailing market value of your car or Insured Declared Value (IDV): IDV or the Insured Declared Value is the current market price of your car. Higher the market price, the higher the car insurance premium.
- Make and model of your car: Certain cars are more expensive to insure. For instance, luxury cars will have a higher market value, thereby a higher insurance premium.
- Engine cubic capacity : Car insurance premium, especially third-party insurance premium, is based on the engine cc. Higher the ccs, the higher the insurance premium.
- Age of your car/Date of registration : Newer cars have a higher market price than older cars. As a result, the cost of insuring newer cars is higher.
- City of registration/Geographical location : Urban and metropolitan areas are crowded, with higher traffic and increased chances of accidents and damage. Thus, the car insurance premium for cars in urban areas is higher.
- Add-ons you opt for : Each add-on entails an additional premium. Thus, the more add-ons you opt for, the higher is your premium.
- Any No Claim Bonus: NCB is a discount that insurance companies provide on the renewal premium if you do not file a single claim during the policy year. If you regularly file claims, then you won’t get the NCB benefit and continue paying higher premiums.
- Type of car insurance: Comprehensive car insurance plans are costlier than third-party covers and standalone own-damage covers.
There are various other factors, such as the modifications or special additions you do to the car, the percentage of voluntary deductions, the anti-theft measures you take, etc. that impact your car insurance premium.
How to Lower Your Car Insurance Premiums?
Calculate and compare car insurance premiums: When you compare the different car insurance plans, you can understand the benefits available under each plan. You can shortlist the car policies online based on your priorities, such as ease of claim settlement, number/type of add-ons, list of inclusions and exclusions, etc.
You can use an online car insurance calculator to determine the exact premium payable for the car policy online. When you calculate and compare car insurance premiums, you find the best low-premium car insurance plan that not only fits your budget but also satisfies your insurance needs.
Avoid major modifications and additions to your car: You may make cosmetic modifications to your car or add extra components for added features. However, any modification increases the market value of your car, thereby increasing the overall premium outflow. Therefore, to buy low-premium car insurance, do not make unnecessary modifications or additions to your car.
Opt for a high voluntary deductible: A deductible is the proportion of the claim amount that you will pay out of your pocket, while the rest is paid for by the insurer. If you opt for a higher deductible, the liability of the four-wheeler insurance provider is reduced and they will offer you a lower premium. However, be careful as to not opt for a very high deductible. In the quest of reducing your premium amount, you will pay a big proportion of your claim amount yourself, thereby defeating the purpose of saving money.
Choose your add-ons carefully: A comprehensive car insurance policy allows you to further extend and enhance the coverage by opting for specific add-ons, such as zero depreciation cover, roadside assistance cover, return to invoice cover, etc. You have to pay an additional premium for every add-on. Thus, the higher the number of add-ons you opt for, the higher will be your premium.
Therefore, be very careful and analyse your specific needs before you finalise the add-ons to ensure low-premium car insurance. For instance, zero depreciation cover is essential for luxury cars. So, if you have a basic hatchback, you might not need this add-on.
- Take care of minor claims and build up your No Claim Bonus: The NCB discount starts with 20% for one claim-free year and goes up to 50% for five or more consecutive claim-free years. However, it resets to zero the moment you file a claim, however small. Therefore, it is prudent to not file 4-wheeler insurance claims for every minor damage to your car.
The best way to determine if you should raise a claim or not is to compare the cost of repairs with the accumulated NCB amount. If the NCB discount is higher, it makes sense to retain the discount and not file a claim.
Install anti-theft devices: The amount of car insurance premium you pay is directly proportional to the liability the car poses to the insurance company. When you protect your car from thefts by installing anti-theft devices, you reduce the liability, thereby reducing the premiums. For low-premium car insurance, reduce the premium by installing anti-theft devices, such as anti-theft alarms, CCTV cameras in the garage or parking space, steering locks, gear locks, etc.
Opt for third-party insurance for old and rarely used cars: 4-wheeler insurance is available as third-party insurance, standalone own-damage cover and comprehensive cover. While the third-party cover is a legal mandate in India, it is advisable to opt for a comprehensive insurance plan.
However, comprehensive car insurance, due to its wider coverage, is the costliest plan among all three. Therefore, if you have an old car, that you keep around mostly for nostalgic purposes or an old car whose IDV is almost equivalent to the total car insurance premium required to buy a comprehensive cover, you can opt for a third-party insurance plan and save on premiums.
- Renew your car insurance on time: If you fail to renew on time and let your four-wheeler insurance policy lapse, any accumulated discounts, especially the NCB benefits, lapse with it. Additionally, a lapsed policy point to the unreliability of the policyholder.
All these factors can bump up the premium. Thus, to ensure cheaper car insurance, reduce premiums by renewing your car insurance on time.
If you are a car owner, it is financially prudent and legally mandated to have a valid car insurance policy at all times. Getting a 4-wheeler insurance policy is easy as well as affordable. Follow the above-mentioned steps to reduce your total premium outflow and find the low-premium car insurance that suits your budget.
If you are looking for a car policy online, check out four-wheeler insurance from Tata AIG. We offer third-party car insurance, a standalone own-damage cover and a comprehensive car insurance plan. You can also make use of our online car insurance calculator to calculate your premium and buy a policy as per your needs and budget.