How does the classification of cars impact your insurance policy

It can be a simple third-party car insurance enough to meet the legal standards or a more elaborate comprehensive cover.

The type of vehicle plays a significant role in determining the vehicle insurance premium.

Relation between vehicle type and insurance premium

The cost of a car insurance premium is directly proportional to the cost of the concerned vehicle. This implies that the higher the cost of the car, the higher the premium you have to pay for its insurance.

Four-wheelers are broadly classified into 3 important categories:

• Hatchback
• Sedan
• SUV or Sports Utility Vehicle

All the other variants are simple crossovers between these 3 types. You must note that the average hatchback price is much lower than that of any standard sedan or SUV. This implies that the average car insurance premium of any hatchback will be comparatively much lower than that of any SUV or sedan.

Need for car insurance.

As per the terms of the law, purchasing car insurance is mandatory, as per the Motor Vehicles Act of 1988. Failing to meet this will attract hefty penalties and even imprisonment under certain circumstances. As per law, third party car insurance is compulsory for every vehicle.

Such insurance plans offer basic insurance coverage against injuries and damages to a third party during any accident. Since this is the basic coverage, the premium rates are comparatively much more affordable.

Other critical factors affecting car insurance premium

Certain other crucial factors that affect the car insurance premium rates include:

1. Car insurance type:

The cost of standard third-party car insurance is comparatively much lower than comprehensive coverage. You must purchase a long-term third-party plan for your new vehicle as per the legal mandate. However, purchasing a comprehensive cover is more suitable as it will consider the damages to your vehicle too and not only the third party.

2. IDV:

This means the Insured Declared Value. It implies the value that your chosen insurance provider will pay in the case of theft or irreparable damage to your vehicle. You can decide on the IDV during the plan purchase considering the current market value. Note, that an unnecessarily high IDV will enhance the car insurance premium to a significant extent, while setting it too low will enhance the risk of excessive OUP expenses.

3. Fuel type:

Fuel type is also a significant determinant of premium costs. The premium of a CNG car is comparatively higher than any petrol or diesel car. Moreover, the premiums of diesel cars are higher than petrol-driven cars, because of the higher vehicle value.

4. NCB:

This is an exclusive of a comprehensive plan. No Claim Bonus or NCB is the reward that the insurer offers for every claim-free year. This keeps enhancing reaching up to 50% of your car insurance premium. However, once a claim is raised, it resorts back to zero. You can buy an NCB add-on along with your comprehensive plan. It automatically allows up to 2 claims during one policy period without any value reset.

5. Security devices:

Your car insurance provider will allow a special discount up to a certain extent for installing certain typical ARAI-certified security devices.

6. Year of car manufacturing:

When a car is recently manufactured, the premium tends to be higher. As the vehicle gets old, it gradually begins to lose its value, eventually resulting in lower premiums.

7. Make and model of the vehicle:

A premium expensive vehicle will attract a higher insurance premium value as it involves higher risk and liability.

8. Add-ons:

You can enhance the scope of your comprehensive plan by customising it to a certain extent by adding certain add-ons or riders. Each rider will add a certain cost to your existing premium amount. You must be wise enough to choose only the most suitable rider(s), preventing unnecessary financial drainage.

Impact of vehicle type on the third-party premium cost

Maintaining a third-party cover is mandatory for every vehicle plying or willing to ply legally in India. In this context, we must note:

1. Vehicles with an engine capacity lower than 1000 cc will have the lowest cost of premium for a third-party plan.

2. Vehicles with engine capacity of over 1500 cc will have the highest premium in a third-party insurance.

3. Cars with engine capacities over 1000 cc but below 1500 cc will have a third-party insurance premium ranging between these two variants.

Impact of vehicle type on comprehensive premium cost

Comprehensive coverage is a more elaborate coverage, considering the damage to both the third party and self. In the case of deciding the car insurance premium costs:

1. The segment type of the concerned vehicle becomes a significant determinant in deciding the IDV, which directly affects the premium. So, purchasing car insurance for a smaller car with a comparatively lower purchasing price will be invariably lower.

2. Several insurers consider the body type of the vehicle for deciding the premium. Because of its small size, hatchbacks always provide the cheapest insurance. Sedan insurance costs will be a bit higher than them. SUVs and MUVs bear the highest insurance cost.

3. Premium sedans and hatchbacks will charge even higher insurance value despite their small size.

4. Sports sedans and SUVs, luxury SUVs, hypercars, and supercars bear the highest insurance costs because of their complicated mechanism and high-tech engineering, leading to expensive repairs.

Conclusion

Buying car insurance may seem to be a boring chore, but it is extremely critical. Not only to meet the legal standards is necessary for the safety of your own beloved four-wheeler. The importance of having ample insurance coverage is only understood once you need to make any claim. Every penny you invest in purchasing a competent car insurance plan for your vehicle is worth it when you do not need to bear the entire repair costs and compensation costs by yourself. Ensure to invest wisely in car insurance to keep your beloved four-wheeler well protected against unforeseen accidental circumstances.

Disclaimer: This article is a promotional feature and does not have journalistic/editorial involvement of Hindustan Times. The content may be for information and awareness purposes and does not constitute any financial advice.