Purchasing car insurance is a legal requirement but the premium we pay for it is flexible. We can decide the extent of the coverage and pay the premium amount accordingly. But there are some key factors that play an important role in deciding the premium amount. Most of us are unaware of the nitty-gritty involved in calculating the premium for your car insurance.
Because of this unawareness, we often lose out on important benefits while trying to lower the car premium amount. To help you strike a perfect balance between the cover you need and the payable premium; we highlight a few leading factors that impact the premiums of any car insurance. Stay hooked!
- Geographical Location
Your area, city, and locality play an important role in deciding The Car Insurance Premium. Busy areas with high accident rates attract a higher premium. Hence, urban areas and especially metropolitan cities have comparatively higher rates than urban areas. Again, if rural areas have a challenge in getting a car repaired because of a lack of proper resources or unavailability of parts, it would attract a higher premium. Areas with a higher theft rate will have a higher premium amount.
- Personal Factors
Personal factors like age, gender, and marital status also play a vital role in determining the car insurance premium. Young men attract a higher premium compared to young women but the situation is reversed with older men and women. This is because statistics suggest that young men and older women get more involved in car accidents than their counterparts.
It is also believed that married men are more responsible and less likely to be involved in an accident than bachelors. Hence unmarried men attract higher premium amounts. But for all personal factors, the difference in the premium amount is not much.
- Profession
The profession of a person also impacts the auto insurance premium. People who are mostly on the roads like delivery drivers, journalists, etc. need to pay a higher premium because of an increased risk of getting involved in an accident. Likewise, pilots, scientists, etc. need to pay less as they are barely on the roads. Even policemen, paramedics, insurance underwriters, etc. need to pay less premium as they are deemed as more responsible and careful than an average driver.
- Credit Score
Even though its correlation is not very apparent; people with low credit scores need to pay a higher car insurance premium.
- Safety Rating
At the time of manufacturing, every vehicle is given a safety rating. A car with a higher safety rating has a low premium amount as it is less likely to be involved in an accident or cause its passengers severe damage even if involved in an accident.
- Types of Engine
Diesel-run engines have a higher premium cost attached to them against its petrol-run version as diesel cars are more expensive than petrol ones and have a higher IDV. Similarly, cars with larger engines relative to their body size will have a higher rate. Given that, a sports car with a V8 engine has a higher premium than a small car with a V4 engine.
- Vehicle Size
Larger vehicles attract a lower premium as they are considered safer than vehicles of smaller size in an accident. Hence, with the same safety ratings, larger vehicles will have a lower premium than small cars of the same safety ratings.
- Age of the Car
Even though the repairing costs of an old car and a new car are the same; an old car has a higher chance of being ‘totaled’ in an accident. Moreover, the repairing cost of an old car can sometimes be higher than its total worth. Thus, owners are likely to dump the old car and instead opt for a new car. Given that, a newer car has much higher collision coverage rates and thus a higher premium than an old car.
- Likelihood of Theft
Insurance companies aggressively follow the pattern of car theft. The create a list of cars that are most often stolen and are deemed as favorite of thieves. If your car features in this top ten list; you need to pay a higher premium amount compared to other safe cars.
- Security Features
The security features that come inbuilt in a car and the security system that you install, all play a vital role in deciding the premium amount. Features like airbags, anti-theft systems, GPS tracking systems, etc.; all will go a long way in lowering the car premium rates.
- Personal Driving Habits
Your driving history and activity also impacts your car insurance premium. Drivers with a good driving history i.e. with barely any accident or driving tickets need to pay a lower premium than the rash and careless drivers.
Final words
While these are some of the leading factors affecting a car insurance premium; there are plenty of other factors that impact the car insurance premium like the type of insurance plan selected, the extent of coverage taken, the add-ons, deductibles, co-pay, available discounts, etc. One needs to see the cumulative effect of all these factors and then select the best insurance plan for their car.
