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Top 7 Factors Influencing Car Insurance Premiums

Car Insurance Premium is an expense that every car owner makes to ensure safety. However, it is important to research the various aspects of insurance policies available in India today. Without knowledge of insurance premiums, it is easy to end up paying a higher premium for an insurance that has less coverage.

There are many factors that determine auto insurance premium and these factors are purely based on statistically proven risks. Higher the risk, higher is the car insurance premium.

Top 10 factors that influence car insurance premium

Age, Cost of Spares, and Class of Vehicles

The age of the car plays an integral role to determine the premium. Renewing a premium on an older car is higher than a premium of a new car, since the older car is susceptible to more damage and therefore most costs of repair. If a particular car brand charges high for spare parts, the premium will also increase. A simple family sedan will have a lower premium than a trendy and fast sports car. This is because the spare parts of a sedan are priced much lower as compared to high-end sports cars. Vehicles like SUVs, luxury cars, and sports cars have a higher frequency of claims, since they cost more to repair in case of damages. Therefore, these types of vehicles are likely to be associated with higher premiums. Larger cars with better safety during collisions may have a lower insurance premium compared to large cars without safety equipment.

Age of Driver

According to insurance professionals, drivers belonging to an age group of below 25 years pose a higher risk and therefore the sum insured is heftier for them as compared to those who are above 25. It is also believed that married and non-smoking drivers fall in the lower risk group and hence pay lower premium for their auto insurance policy. Statisticians have proved that the middle-age group falling between the ages of 25 to 40 years comes under the lower risk category.

Gender

According to professionals and studies made in this respect, females are considered to be safer than males when behind the wheel. Though the trend of safe driving with respect to women may change over a period of time; currently, female drivers tend to pay 40% lower in terms of premium compared to young male drivers.

Place of Residence

The place where the driver resides also plays an influential role on a car’s insurance premium. Car insurance premiums are higher for owners residing in a big city, where accidents occur more frequently, as compared to the owners residing in rural areas. Cities where car thefts and car accidents are an every occurrence have a higher insurance premium compared to cities where such occurrences are low.

Usage of Automobile

Statistics clearly state that high annual mileage defines greater risk of accidents. The average mileage by the insurance companies is dictated to be 12,000 miles per year. This refers to the mileage of those cars that are driven between a person’s work place and home. The reason why these cars have a higher tendency to be involved in car accidents is because of the heavy traffic conditions during office hours or on busy city roads – the longer the time spent on busy roads, the greater the miles covered, and the higher the risk of an accident. If a car runs in small towns or if the owner is a farmer who seldom drives in heavy city traffic, the insurance rates are reduced.

Driving Record and Driving Habits

The insurer has a monitoring device that is often fitted to the insured person’s car to track the driving habits of the driver. The device works on satellite and cellular phone technology to track driving violations and driving skills. It also tracks the mileage of the car per day and the time of the day when the car is driven the most. If the insurer comes to know repeated incidences of accidents or if the device tracks reckless driving habits, the driver is slapped with a higher premium. However, in India these types of technologies are not yet in rampant use in all cities and therefore insurers heavily rely on FIRs or traffic police records to keep track of drivers and their violations.

Anti-Theft and Safety Devices

Insurance companies also give special privileges to owners who have installed anti-theft and safety devices like an alarm system, airbags, cruise control, and tyre pressure monitoring in their cars. These car owners get lower insurance rates because their cars are less prone to accident damage or any kind of in-car injury.

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