How is car insurance premium calculated?

car insurance premium calculated

Typically an insurance company enters into policy contracts to individuals or assets against pre-defined losses. Consequently, it makes use of some heavy duty math to work out the prospect of the losses being incurred. This is known as risk assessment and depends on various factors to determine car insurance quotes. Let’s check out what these factors are:

1. Area of residence
Rural areas and small towns, where usually the driving is lesser in comparison with the urban regions with greater mileage, prospects of accidents and theft call for lesser premiums. Furthermore, weather influence such as regions featuring a high amount of rainfall and snow leading to possibilities of the great weather associated accidents cause higher premiums.

2. Car model
This is another crucial factor that determines how premium of car insurance gets calculated. The car model, engine and most prominently, its quality of maintenance and repair all affect the premium rates. In case a car is finely maintained and contains safety gadgets and alarms, it is likely that the insurance company may charge less premium. On the other hand, if a car is more prone to harm other vehicle or property in an accident the insurance provider may charge a higher premium.

3. RTO
The city and RTO office from where your car is registered will play a significant role in determining your premium amount. So if your car is registered in Mumbai with high road traffic and higher likelihood of accidents, the premium will be higher than other rural areas.

4. IDV
IDV is the amount you can claim for theft or total loss of the vehicle. Based on this value, the insurance company will determine the amount of premium you would need to pay.

5. NCB
The insurance company incentivizes zero claims made for a car with a No Claims Bonus. The discount can go to as much as 50% of the premium value for 5 consecutive no-claims years. This is also a significant factor in determining the premium amount.

These are the factors that determine the car insurance premium. If you are looking for insurance for your car, it is recommended to do some research and then choose the best company that offers the best car insurance quotes.

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