How Does Increase In Insurance Premium Affect You ?

In these uncertain times, having an active car insurance cover should be on the top of our priority lists. Your car insurance is like an extra air-bag which can be extended to protect you from a financial accident.

Many of us shy away from buying car insurance by citing reasons of ‘high premium rates’. What we pay as Premium for car insurance usually decides the policy we buy and a rise in Premium rates definitely impacts our policy choices.

Trying to negotiate your safety and that of your loved ones against a hike in car insurance premium rates is a wasteful exercise. While we all want a policy which is ‘Cheap and Best’, many times a cheap deal can cost us heavily in times of crisis.

 It is wise to assess our car insurance needs in order to stop us from getting a restricted cover for a low price and also from overspending on unnecessary add-ons which the agent or the car dealer suggested leading to an exorbitant premium !

Luckily, there are online car insurance calculators which can help you compare the rates of premiums, the current market price of your car (IDV) and the coverage offered by various insurance providers. Get an instant quote on your car insurance premium, compare the rates and cover and opt for the best insurance policy which covers all your insurance needs at a comfortable price.

Premium rates are subject to a rise or hike every year. While few reasons for this hike are tangible and controllable to an extent, (maintaining a claim-free, accident-free, violation-free driving record etc. ), other reasons are simply out of our hands (rise in claims incurred in the previous year, increasing cases of theft and vandalism in your area etc. ).

At the end of the day, a premium hike is inevitable. However, this rise in rate is manageable and if you play you are well-informed on the conditions of your insurance and avail benefits of NCB etc.,  a premium hike need not necessarily have a negative effect on your finances.

Let’s understand the effects of a rise in car insurance premium rates :

The common factors which bring about a rise in rate of car insurance premium :

  • History of Claims – If you have ever filed a claim, the premium for your car insurance tends to increase. Moreover, if there have been multiple claims in the same year, it becomes a liability on the insurer, directly leading to a rise in premium rates.
  • Driving Record and Violations – If you have a history of being in an accident or you have traffic violations like drunk driving charges, challans etc. issued against you, you could be paying a higher premium.
  • Change in Location –  If you move cities and shift to a metro city, the premium charged will be higher compared to semi-urban or small towns. Or if you live in an area where cases of vandalism/theft/fire etc. have been noted, it could lead to you paying a higher premium.
  • Add-Ons – Add-on covers let you opt for features like Roadside Assistance or Zero Depreciation cover, to make your car insurance more extensive. Every add-on is separately charged and the cost raises the value of your basic premium.
  • Incurred Claim Ratio – This is the ratio of the number of claims settled or paid out by the insurer in the previous year. If the number of claims have gone up in a particular year and the insurer has a good claim settlement ratio, i.e, the insurer has paid out maximum claims, they need to recover the loss and hence, under IRDAI guidelines, they adjust the chargeable premium in the following year.
  •  Inflation – When the cost of commodities is on the price, your insurance is also adjusted because of this inflation in price leading to a higher premium. This revision of premium rates is a regular exercise conducted by IRDAI on an annual basis.

Now, let’s take a look at the change in car insurance premium rates caused by one or more of these factors :

Rates of Third Party Insurance for Private Cars with Engine Capacity

Type of Vehicle Premium Rate for FY 2017-18 Premium Rate for FY-2019-20
Less Than 1000cc ₹2,055 ₹2,072
1000-1500cc ₹3,132 ₹3,221
Above 1500cc ₹8,630 ₹7,890

The change in premium rates doesn’t seem so scary , does it ?!

These changes are subject to market conditions which not many of us can control. Moreover, with features like No Claim Bonus (NCB) which can help reduce the rate of premium upon renewal, as long as we have a claim-free year , the change in rate might not even affect you !

Change in premium rates is not a cause of worry for you as long as you drive clean and safe and keep your insurance updated !

Get your car insurance quote on the online car insurance calculator today.

Rest Assured and Get Insured !