Do you know how is your car insurance premium calculated? Most of the time the premium can be adjusted for any discount or bonus that the insurer has assured to offer you, however in any case, these are calculated only after the insurer has fixed a premium amount that they want to impose on you.
Here are the important factors that influence the premium amount you have to for your car:
• Insured Declared Value (IDV)
At any given point in time, a car has a market price associated with it. If you get into a car accident, the amount that you are compensated for by the insurance company under the comprehensive insurance coverage is directly linked to the value of your vehicle at that given point of time. For example: if you have a brand new car that you have just got out of a showroom, its value will be more than a 5-year-old car with 50,000 kilometres on it. Precisely, IDV is the value that the insurance company sets on your vehicle to get its worth at the time you apply for motor insurance.
Motor insurance policies are indemnity policies. This further means, that they just compensate you with an amount so that you can meet the financial loss you have suffered on the vehicle and nothing more. IDV is the maximum amount you can claim under a motor insurance policy in order to compensate for any loss caused because of theft or accident.
When you buy a new car and are getting insurance for it, the IDV is calculated on the price of the new car. If you have a car for which you are renewing the insurance, the IDV will be calculated considering any wear and tear that the car has had.
In case you have any accessories, such as a special music system or speakers in your car the value of these items that are additional to the price of the car. It is then added to the IDV, adjusted for any depreciation that these items might have had.
Please Note, the IDV calculation is used only for a comprehensive insurance policy and not a third party insurance cover.
• Cubic Capacity (CC) of the vehicle
Every car has a specific engine size, which is measured as its cubic capacity. The size of the engine does influence the premium you have to pay for a third party insurance cover. The premium amount is the same for a new car as for an older car because the premium is a function of the engine size and does not depend on the age of the car. You can find out the cc from the registration papers of your vehicle.
• Age Of The Vehicle
As your car ages, it loses value also goes down for many reasons. Thus, the newer models of the same car might have more value than an old used car. Along with that, the wear and tear of the vehicle makes it less valuable than a new car of the same model.
Insurance companies follow a fixed schedule to decide the premium that you will pay to have your car insured. However, for the vehicles that are older than 5 years, the insurance company and the insurer will together conclude the value of your vehicle, which will take into account the condition of the vehicle and the depreciation schedule.
If you want to have a third party policy, then the depreciation cost will not apply to your car. The premium is decided depending on the engine size only.