Why Does Car Insurance Premium Increase Every Year?

Why Did My Car Insurance Premium Go Up?

The primary reason for the increase in Car Insurance premiums is the revised rates by the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI will revise Third-Party Insurance premiums every year by reviewing the loss ratio of the insurance companies and the total number of claims raised by the policyholders.

 

After carefully considering these factors, the revised Third-Party Insurance rates will be declared. As per the Motor Vehicle Act 1988, every car owner must have valid Third-Party Insurance to drive in India.

 

During accidents, Third-Party Insurance covers the liability caused by the policyholder to the third party. These accidents can lead to major damage and even loss of life. In such cases, Third-Party Insurance ensures that the affected third party gets financial help.

 

Factors Affecting Car Insurance Premiums

Car Insurance premiums can increase on a regular basis for various reasons. The factors that are considered before increasing the Car Insurance premiums are listed below.

 

Geographical Location

The policyholder's geographical location will be considered while revising the premium of the Car Insurance. India is classified into zones Zone A and Zone B. Zone A includes metro cities like Chennai, Bangalore, Ahmedabad, Pune, New Delhi, Mumbai, Hyderabad and Kolkata. In contrast, Zone B is the rest of the cities in India. People residing in Zone A usually have a higher premium when considered in Zone B.

 

Driving Records

Certain insurance companies check the policyholder's driving records to analyse their driving habits and patterns. With this information, the insurance provider will analyse whether the individual is breaking any traffic rules or how often they are breaking the traffic rules.

 

If the individual or the policyholder has a bad driving record or often breaks the traffic rules, the insurance premium will increase.

 

Claim History

The claim history of the policyholder will also be analysed. It will also help the insurance provider analyse the frequency of the claims and if the driver is safe. It is considered a risky driver that can be a liability to the insurance providers due to frequent claims. In such cases, the premium will usually be higher for risky drivers.

 

Type of the car

The type of car the policyholder has also plays a major role in determining the Car Insurance premium. If a policyholder has a luxury car, the premium will usually be high, considering the cost of the car's spare parts.

 

Insured Declared Value (IDV)

The Insured Declared Value (IDV) is the maximum claim amount the insurance holder will pay for the insured car in case of total loss. If the policyholder declares a higher IDV, then the claim amount to be paid by the insurance provider in case of total loss will also be high. This can also lead to an increase in the premium rates.

 

Tips to Reduce Car Insurance Premium

These simple tips listed below will help you reduce the increase in your Car Insurance premium rates.

 

Try to build your No Claim Bonus points. The NCB helps you reduce your premium rates if you do not make any claims during the previous policy year. When renewing, implement the NCB, which will lower your premium.

 

Applying for minor claims will break your NCB and increase your premium. As a result, you will have to rebuild your NCB points from scratch. The installation of anti-theft devices reduces the risk of theft, reducing the insurance premium.

 

Add-ons provide extra protection than basic coverage. However, it is important to choose only the necessary add-ons.

 

Always renew your policy on time. It is important to renew your insurance at least 60 days before the expiry date. If you miss the expiration date, the NCB will be broken, and the car insurance premium will increase.

 

Conclusion

Car Insurance premiums are decided based on various factors, such as car model, geographical location, and the policyholder's claim history. However, Third-Party Insurance premiums cannot be reduced as they are decided by the IRDAI. Comprehensive Insurance premium rates can be reduced by following the steps mentioned above.

 

Shriram General Insurance provides Car Insurance at affordable premiums. Additionally, they provide various add-ons that will cater to individual requirements. The claim initiation process is also very easy and can be initiated online.

 

FAQs

1. Will the Car Insurance premium increase every year?

It is not necessary that the Car Insurance premium increase every year. Factors like a clean driving record, NCB points, and lower claim frequency help reduce the premium. However, Third-Party Insurance is determined by the IRDAI and cannot be altered or reduced.

 

2. Does the car type influence the Car Insurance premium?

Yes, the type of car will influence the Car Insurance premium. Luxury cars have a higher premium owing to the cost of their spare parts.

 

3. Which type of Car Insurance is recommended?

There are three types of Car Insurance: Third-Party Insurance, Own-Damage Insurance and Comprehensive Insurance. Third-party Insurance is mandatory according to the Indian Motor Vehicle Act. Comprehensive Car Insurance includes Own-Damage Insurance, Third-Party Insurance, and add-ons, which can also be selected de