How To Calculate Car Insurance Premium?

By Author: Patil Siya
Total Articles: 4
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It’s important to take the necessary measures to ensure that your vehicle will always look and performs its best when you use it. This means performing regular maintenance on its various systems. These include checking your engine oil regularly, maintaining tire pressure, etc. However, the best thing you can do for your car is to protect it against the possibility of damage or loss.
Getting a car insurance policy is a perfect way to protect your vehicle. It is one of the most critical steps in the right direction to ensure its longevity. It is the most valuable safety net you can have in case of an accident. It provides peace of mind and savings at the time of repairing your vehicle.
However, buying car insurance involves a lot of careful planning. Understanding how much coverage you need is very important and a perfect example of buying insurance right. Knowing the exact amount of coverage, you need will help you make informed decisions when it comes to your car insurance. One of these informed decisions is how much premium you are willing to pay for the right amount of coverage.

How car insurance premium ...
... is calculated?
The car insurance premium is decided based on a long list of factors. These factors, in turn, can have various types of relevance to you or to your car. Each factor is considered by the insurance provider to verify what amount of coverage you are eligible for and what is the optimal premium you should pay for it.
Every insurer has its own parameter that they use to calculate the ideal premium for you. While there are some affecting factors that are common across various insurance providers, the specific ways and parameters of judging these factors are completely different across each insurance company. Hence, it is important to know what these factors are and how they can determine your premium.

Factors that determine car insurance premium
• Vehicle’s Age
When it comes to a vehicle’s age, the starting point is the manufacture date of the car. Depending on how long it’s been since a car’s manufacture date, a car has a certain market value. This market value can deem a car valuable. An old car is less valuable in terms of market value. This explains why many insurance companies charge a higher premium to cover an older car.

• Car model
Not every car is the same. This means that not every car will need the same amount of coverage for repairs. Less coverage translating to less demand means a lower price. This means if a specific car model needs less coverage for repairs, the price for it will be lower as well. For example, if a specific car model uses parts that are more expensive to buy, it would need more coverage. This, in turn, means that the policy of this car would charge a higher premium.

• Fuel type
The fuel that your car runs on is a distinct feature of any car. In fact, deciding whether you want a petrol-run, or a diesel-run car is one of the most important parts of the purchase. Hence, the fuel type of a car also affects the premium that you would have to pay for its insurance policy. Insurers offer varying premiums to buyers that own vehicles belonging to different fuel types. For example, if you have a vehicle that runs on CNG, your premium is likely to be lower compared to petrol and diesel cars.

• Location
Some areas are more prone to accidents and theft than others. This explains why some people have higher insurance rates for the same vehicle that their friend might own in a different location. The location of the registration is what insurance providers check when selling your car insurance.
For example, metro cities with a higher vehicle density have a higher risk of an accident. Since vehicle density increases the likelihood of an accident, cities like Mumbai and Delhi see a lot of accidents and mishaps. Hence, a vehicle registered in metro cities might have higher car insurance premiums.