Factors Which Increase your Car Insurance Premiums

Factors Which Increase your Car Insurance Premiums

According to the Motor Vehicles Law, 1988, automobile owners are compelled to insure their vehicles. In case such individuals disregard the law, they may need to pay a fine of Rs. 1,000 or spend 3 months in jail in compliance with amendments made to the Motor Vehicle Law on 1st September 2019. 

Even with the law in action, there are more than 70% automobiles in India, including car which are uninsured. Such noncompliance leads to significant financial and life losses, given the abundance of cars and other motor vehicles on the roads. 

Statistically, more than 1,200 road accidents occur every day in India. Hence, if you have not subscribed to a car insurance plan yet, you should consider doing so to avail financial coverage in case of accidents and avoid fines or jail time as stipulated previously. 

Causes of expensive car insurance premiums

Premiums on automobile insurance policies vary considerably depending on a few factors. Car insurance premiums can be steep at the time you are obtaining an insurance plan or during the course of the policy period. 

Actuaries employ various mathematical procedures to gauge the probability of an event occurring which can lead to an insurance claim. These calculations are made upon various grounds.

The factors which contribute to expensive 4 wheeler insurance premiums are – 

  1. Claims history: In case you have a substantial history of availing claims from car insurance policies, it represents you as a reckless driver. Insurance aggregators gauge you as an individual likely to be a party to more similar events in the future where you avail claims. Subsequently, they raise your premiums on a car insurance plan. Actuaries estimate the likeliness of such an event and charges premium accordingly. 
  2. Credit score: Credit score is a 3-digit number ranging from 300 – 900, and it quantifies an individual’s creditworthiness. It is primarily used by financial institutions during loan advancement and credit card issuance. Nonetheless, it is also used by insurance aggregators when deciding on the premium for your loan. If you hold a healthy credit score, your premiums on car insurance plan will be relatively lower compared to an individual with a poor CIBIL score. In case your credit score falls during the policy period, your aggregator can decide to increase your premiums. 
  3. Driving record: Your premium also depends on your driving record of the past as well as of the present. Having a clean driving record, i.e. no Motor Vehicle Law violations can lead to low premiums on automobile insurance; whereas, having a poor driving record will allow your insurance aggregator to increase your premiums.
  4. Experience: Age or experience of the individual applying for a premium plays a significant role in deciding the amount for premium. A less experienced driver needs to pay a higher premium compared to an individual with substantial experience. 

Consequently, if you want to pay lower premiums, ensure that these factors remain advantageous to you when you buy Car Insurance online from NBFCs like Bajaj Finserv.

Types of car insurance policies

There are primarily two types of automobile insurance plans offered by financial service providers, which are – 

  • Comprehensive policy: Such a policy offers an overall financial coverage regarding all forms of damages suffered by your car as well as any third party’s where you are at fault. Damages covered include car collision, subject to vandalism, etc. 
  • Third-party car insurance: Third party insurance is exclusively designed to compensate for financial losses and health injuries suffered by a third-party owing to an accident. 

Given the frequency of vehicle accidents, and the rising number of accident casualties every year, you should also consider a life insurance policy. It will allow your family to receive compensation on account of your death or you can receive the full amount on maturity. You can apply for a life insurance and car insurance online by visiting the aggregator’s official website. 

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