Renewing or purchasing an Acko car insurance policy? The premium payable comes on your device’s screen once you provide the details asked for. While paying the amount, the thought as to what factors decide the value of the premium must have crossed your mind. This post offers an overview of all the factors that impact the policy premium’s value.
Remember, you must disclose all the information sought by Acko accurately during renewal or purchase, even if this drives up the premium value. Further, Acko keeps you updated about the entire array of relevant details through the policy document generated after premium payment. You can clear all your doubts regarding car insurance premiums by going through the policy wordings or calling the Acko representative. You must not discard the insurance coverage if the premium appears high. Not getting insured with even a basic third-party cover exposes you to legal hassles.
Important Factors That Impact Your Car Insurance Policy Premium
It is a basic human instinct to buy cheaper things. This applies to car insurance too. In a bid to lower the premium value, we often voluntarily reduce the Insured Declared Value (IDV) of the car or discard the comprehensive/ own damage coverage option. Such a step can expose one to a significant financial burden if an unfortunate incident involving the car happens on the road. To avoid such costly mistakes, you must gain clear insight into car insurance premium value determinants. These have been discussed below.
1. Model and Make of the Car
A costlier car model like a feature-laced spacious SUV will fetch a higher insurance premium compared to a small passenger car like a Renault Kwid. This implies that the premium is affected by:
- Model (luxurious, utility, or mid-segment car)
- Make (sedan, SUV, convertible, coupe, crossover, hatchback, etc.)
- Variant based on fuel economy, installation of costlier accessories, etc. (like XL, GLI, XLI)
- Manufacturer (Indigenously configured car or imported)
- Engine’s cubic capacity
If your car runs on CNG instead of diesel/ petrol, your insurance premium would be higher as the cost of safeguarding the CNG kit shall be included in the overall coverage.
2. Age of the Car
The number of years elapsed since you purchased your car has a bearing on car insurance premiums. The car's components are subject to age-induced wear and tear, which leads to depreciation in their ex-showroom value. This depreciation is factored in while calculating the present market worth of the car known as the IDV.
The depreciation quotient is directly proportional to car insurance premiums. Hence, you need to pay less for insuring an old car than a newer one.
Depreciation rates for car components are mentioned below.
- 50% - Parts manufactured out of nylon, rubber, and plastic
- 50%- Battery and tires
- 30%- Components made of fibreglass
- 0%- Glass components
The depreciation rates for parts made of wood and other materials are directly proportional to the car’s age. These have been outlined below.
|Depreciation Rate||Car’s Age|
|0%||Lesser than 6 months|
|5%||Between 6 months – 1 year|
|10%||Between 1 – 2 years|
|15%||Between 2 – 3 years|
|25%||Between 3 – 4 years|
|35%||Between 4 – 5 years|
|40%||Between 5 – 10 years|
|50%||Ø 10 years|
The depreciation percentages assumed for claim settlement during the total or constructive total loss of the car are given below.
|Depreciation Rate||Car’s Age|
|5%||Lesser than 6 months|
|15%||Between 6 months – 1 year|
|20%||Between 1 – 2 years|
|30%||Between 2 – 3 years|
|40%||Between 3 – 4 years|
|50%||Between 4 – 5 years|
If your car model has become obsolete, the IDV in car insurance can be finalised through mutual understanding between Acko and you.
3. Area of Car Registration
Your car may be registered in a metro, non-metro, or rural location. The premium value would be higher for a car driven in a metro compared to other areas. This is because your car is exposed to a higher risk of getting involved in an incident since:
- Traffic is more in the metro.
- Roads are congested, which tests the driver's patience, attention, and safe driving skills.
- The pedestrian population on the road is high.
- The number of third-party properties alongside the road is more.
If you live in Mumbai, you will have to pay a higher car insurance premium than what you are expected to pay if you live in Aurangabad.
4. Type or Scope of Coverage
You can purchase either a comprehensive or a third-party car insurance policy. The premium value of the former would be higher as it provides coverage for:
- Own damage
- Partial damage to the car or a complete loss due to theft, rioting, arson, natural calamities, etc.
- Loss of life, partial or complete impairment, or property damage of the third-party
Third-party cover has limited scope as it caters only to the liabilities related to third parties.
5. Add-ons Purchased
The value of your car insurance premium would go up further if you opt for add-ons to enhance the coverage ambit of the standard insurance policy.
Such car insurance add-ons include:
- Zero depreciation cover
- Engine protection cover
- Key replacement cover
- Roadside assistance cover
- Outstation emergency cover
- No-claim bonus protection
- Consumable cover
- Return to invoice cover
- Personal accident Cover for passengers
You can add any or all of the aforementioned add-ons to your standard policy if you seek added protection for your costlier car model against unforeseen circumstances.
6. Claims Raised During Previous Year(s) of Insurance
You become entitled to a no-claim bonus (NCB) at varying rates if you have not raised any claim on Acko during the last year of the policy or the years preceding that. NCB is a discount that reduces the car insurance premium by 20% or 50%.
You should evaluate the claim’s monetary worth before raising and weighing it against the NCB loss your premium shall be subject to in the coming years. Remain extremely alert on the road and refrain from doing stunts, as unsafe driving history can cost you dearly in terms of higher insurance premiums.
7. Installation of Safety Device for Preventing Car Theft
You can avail of a discount on car insurance premiums if you have installed the Automotive Research Association of India (ARAI)-certified anti-theft mechanism in your car. Acko offers a discount as your car becomes safer and miscreants cannot easily steal it.
8. Purchase Online
If you purchase car insurance directly from Acko, you can customise it and pay a reasonable amount as a premium.
Your premium value can shoot up if you:
- Purchase from an agent who charges commission and adds the same to the premium.
- Buy from a car dealer who sells you the bundled-up policy with add-ons you may not need.
9. Voluntary Deductible
Your car insurance premium will decrease if you agree to a voluntary deductible. This will lower the compensation Acko has to pay during car insurance claim settlement as you shall be paying a part of the car repair/ damage restoration charges.
10. Long-Term Insurance Purchase
If you choose to buy long-term car insurance for 3 or 5 years, you will have to pay a lesser premium than annual insurance. Also, the benefit of NCB will not be lost. The cost Acko saves on administrative expenses would be passed on to you in the form of a lower premium value.
11. Membership in the Automobile Association of India (AAI)
If you are a member of the AAI of any zone, you can avail of a discount on car insurance premiums.
You can use the car insurance calculator of Acko to check the premium you need to pay for the coverage you are seeking for your car. You may add or remove some features to understand how the aforementioned factors impact the value of car insurance premiums. However, always keep yourself protected against unpredictable financial liabilities by purchasing a policy that meets your needs optimally.
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