4 Reasons Why You Might be Paying a Higher Car Insurance Premium

Mumbai, August 25, 2020

Selecting the right insurer is an inevitable part of owning a car, be it a new or a used car. When you opt for an insurance plan, you might feel these insurance companies come up with some magic number, and that is set as your premium amount, but no! There are a variety of factors that are instrumental in deciding the premiums.

These premiums are calculated using the different factors that are part of your coverage, the add-on you opt for including the geographic region where you drive your car and more.

But did you know you could end up paying much higher than what should be an ideal car insurance premium amount?

Let us look at how your premiums could be higher than your requirement:

#1 Geographic Location

The registration location of your vehicle is one of the essential factors that influence your premium amount. The insurers treat the metro cities as geographies that are more prone to accidents, thefts, and other risks against which coverage is offered. It is due to the dense population in those areas. On the contrary, the tier 2 cities are not so densely populated and have a lesser chance of damage to your car. While you cannot control this variable in deciding your car insurance premium amount, it is a contributing factor in increasing the cost of premiums.

#2 Selection of Wrong Add-ons

You add-ons can be another factor that is increasing your premium amount. When you opt for a comprehensive cover or standalone own-damage policy, the facility to load more features at marginal prices comes handy. But adding unnecessary or more than essential add-ons will increase the premium. Taking into consideration the possible situations and opting for a suitable add-on is necessary. Say, if you reside in a flood-prone region, an engine protective cover will help prevent unnecessary costs.

#3 Have over-reported the IDV

Insured Declared Value or IDV is the maximum amount which the insurer will pay in case of damages that result in a total loss. The amount of IDV needs to be determined at the time of buying or at car insurance renewal. It is an approximate estimate of the market value of your car. Here, in case you have reported a higher IDV to have a larger amount in case there is complete damage to your car, it can shoot up the premium. To avoid this situation, a realistic estimate of the IDV of your car needs to be mentioned. It will not only keep the premiums in check but also return the value closest to the market value of your car after accounting for depreciation. One must note that the facility to report IDV is available only when you buy a comprehensive insurance cover and not third-party insurance plans.

#4 Frequent Insurance Claims for Small Damages

An insurance policy extends a financial protective layer so that you can enjoy the experience of driving your car and not worry about the cost of repairs. But the insurance companies offer a No Claim Bonus (NCB) for every claim-free year. Taking advantage of this NCB, you can reduce your premium amount. In case you make frequent claims for small repairs, you end up losing any NCB bonus, and you have a continually higher premium that otherwise would be lower. Thus, you must avoid making any claim for the damages, which are easy on your pocket.

Also, don’t forget to make use of a car insurance calculator that can help in determining the amount of your premium before buying your insurance plan. It can come handy to compare the cost (the premium) against the benefits of your car insurance plan.

(Disclaimer: This is branded content. Readers are advised to exercise due discretion before entering into any correspondence, investment, purchase or business dealings on the basis of this content.)

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