Buying a car? Know your insurance premium

Today cars have become an indispensable part of our lives. Whether you intend to buy a Tata Nano, a Maruti Suzuki, a Honda City or a Mercedes Benz, you must buy car insurance.

However, the insurance premium is not common for all types of cars. Hence, you should know the premium amount before you decide to buy a car.

Factors affecting the calculation of premium: The insurance premium depends on the various factors that if selected properly can help you in reducing your premium amount.

• Type of car: With the various types of cars available today in the market, it is not surprising that smaller cars having engines with lower power will attract lower premium than the bigger cars with more power engines. Hence, a Maruti 800 will carry lower insurance premium than Ford Ikon with higher insurance premium.
• City of car registration: As per the Indian Motor Tariff, cities have been divided into two zones: Zone A consisting of Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune and Zone B that includes all other cities. There is a difference in the premium charged for the same car in both the zones. The premium is higher for cars registered in Zone A as compared to those registered in Zone B.
• Age of the car: Older the car, higher the premium charged. This is because as the car ages, it needs frequent maintenance due to excessive wear and tear on its parts. In order to compensate for the claims that you will make on the insurer to bear this cost, you will end up paying higher premium.
• IDV: Insured Declared Value (IDV) is the amount paid to you in case your car is stolen or suffers damages that cannot be repaired. It is computed according to the present price of the car in the showroom multiplied by rate of depreciate. It is fixed by Tariff Advisory Committee at the commencement of start of the policy term.
• Period of cover (if policy is taken for less than a year).
• Any other discounts/benefits like no-claim bonus

No-Claim Bonus: This is one of the most important discounts you will ever get on the car insurance. It is applicable if you have not filed a claim for 5 years. This will help you get a rebate on your next policy renewal.

Other benefits: Installation of anti-theft devices will ensure your insurer will offer you rebate in the insurance premium. Certain insurers also give rebate to the disabled provide they have altered the car for their use.

Also if you are a member of certain registered automobile associations, some insurers give you additional discounts. However, if your car is fitted with certain advanced accessories such as CNG/LPG kit that were originally not included with the car, will increase your premium.

Add-ons with car insurance policy: Some insurers offer certain add-ons like Personal Accident cover along with your policy. If you want to get the car repaired but don't have money to pay for it, cashless claim settlement can definitely help you.

Opting for third party legal liability will help you safeguard yourself against the legal liability in case of accident. Some companies let you claim No-claim Bonus benefit if you have just bought their policy for the first time, but have not filed a claim with your previous insurer.

Having the correct car insurance is important not only from the legal aspect but also from the security angle. It will help you protect against the claims made by the opposite party in case of accident.

But it is very important to select the policy carefully, since with the removal of tariff structure, the companies are free to charge their own premiums. So shop around carefully to get the best deals.