While the thought of purchasing a car hits your mind, it gets followed by the thought of purchasing a car insurance policy. Car Insurance is mandatory by law which makes it a legal requirement to own it. These car insurance policies can be a major lifesaver when you come across any kind of misfortunate incidents on the road.
What is Car Insurance Premium?
Car insurance premium is the money charged in exchange of the coverage you chose while purchasing a car insurance policy. Car insurance premium is the way of income for the car insurance company for which it is liable to provide coverage on claims being made against the policy. The type of car insurance policy you own decides whether the premium has to be paid off monthly or on a semi-annual basis. There are policies where you are required to pay the full amount upfront even before the coverage starts. The better the coverage, the higher is the premium amount of car insurance. Premiums can be paid off using online options, bank drafts, debit and credit cards, cheques, etc.
Ways to Calculate Premium for Car Insurance
Premium is not just a number but has many things included in it. There are various factors to be taken into consideration while calculating premium for car insurance. Components of your car insurance policy that can help you calculate the premium for car insurance is what we are just about to discuss.
IDV is the insured declared value of the vehicle. In layman’s language, insured declared value is your vehicle’s current market value. Knowing your IDV helps you in knowing the maximum amount that can be claimed in case of total loss, damage beyond repair of your vehicle, etc. within the policy period.
IDV = Manufacturer’s registered price – the value of depreciation
- Type and age of the vehicle
The value of car decreases with time, which is known as the phenomenon of depreciation. More the age of the car, less will be its monetary value. Older vehicles tend to be associated with higher premium amounts on your car insurance as they are more susceptible to damages. In the same way, the type of the vehicle also affects the premium amount as each car type comes with its own features and capacities. Depending on your car type, a specific coverage option and thereby, a specific premium amount will be determined.
- Cubic Capacity of the engine
The engine of the car is measured as its cubic capacity. Higher the CC, higher will be the premium amount. As the engine size stays the same for a new and an old car, the premium is not impacted by this factor as far as the age of the vehicle is concerned, while other auto parts do influence the amount.
- Geographical zone
The place where you live affects the car insurance premium. There are insurance zones made by insurance companies as there are places that are more exposed to accidents, like the metro cities. Hence, the premium amount charged in these cities and zones will be higher compared to other cities.
The simplest way to calculate premium for car insurance is by using the online car insurance calculator which in a few steps will consider all the myriad parameters and tell you your car insurance premium accordingly. Reputed companies like Bharti AXA have premium calculators on their official websites.