7 Factors That Determine Motor Insurance Premium


04 Aug 2023

Read about what is premium & 7 Factors That Determine Motor Insurance Premium. Buy motor vehicle insurance from Kotak General Insurance now.

A motor insurance policy is an investment that protects your vehicle under many mutilating circumstances.

Now, who would not want that, right? Looking after your vehicle is a mammoth task, and getting it fixed in case of any minor or major damage just adds to it. So, it’s best to let the insurance policy cover it. Even though motor vehicle insurance is recognised as such a saviour, most people are hesitant to buy it because they are concerned about paying unreasonably high EMIs for the premium amount.

What is the premium amount?

When you buy a motor insurance policy your vehicle is insured for a certain sum, and you make a monthly payment for the same, which is known as the premium amount. Today, the policies are so diverse that there’s a huge scope for you to customise them as per your own needs. This means that you can define your sum insured as well as the premium amount.

Paying more or less of a premium amount is a personal preference and depends on your budget. But to fix a premium amount, you have to understand the factors that are responsible for it. Here are the top 7 factors that influence your motor insurance premium rates.

1. Types of motor insurance

The type of motor insurance you get is highly responsible for deciding your premium amount. Third-party motor vehicle insurance is mandatory by law, whereas comprehensive insurance is a matter of choice. The latter provides all-around protection for you and your vehicle, and it also covers third-party damage. If you just buy third-party motor insurance, its premium may be relatively lower than the premium of the comprehensive motor insurance policy.

Another distinction among the types of insurance is based on the purpose of the vehicle. If you want to use your vehicle for personal needs like driving to work or travelling, you can buy a personal car insurance policy. But if you are buying a vehicle for commercial purposes, like transporting goods or people, you will have to buy a commercial motor insurance policy.

Commercial vehicles are exposed to more risks on the road than personal vehicles. Hence, there are chances that the insurance and premium amount for the former may be more than the latter.

2. Engine capacity

The type of engine, as well as its capacity, defines the premium amount. If your engine runs on diesel, then it's possible that the insurance amount will be higher compared to a vehicle that runs on petrol, because diesel vehicles cost more than petrol ones.

The engine capacity, or cubic capacity, refers to the total power produced by the engine of a vehicle. The CC of your vehicle is directly proportional to the insurance amount. Hence, if you have a higher CC vehicle, you will have to pay a higher premium amount.

3. Vehicle’s age

vehicles as young as 3 to 5 years old are considered low-risk vehicles. Hence, the motor insurance policy for the same comes at a low premium rate. But as your vehicle gets older, it becomes more vulnerable, and hence, you are entitled to higher premium rates. It is ideal to get motor insurance as soon as you get a vehicle to get the benefits of a low motor insurance premium.

4. Add-on coverage

Add-on coverages for motor insurance give you an opportunity to customise your policy. With these coverages, you can provide extra protection for your vehicle against various possible damaging scenarios. These coverages are not a part of your basic motor insurance policy and can be bought at an extra premium rate.

5. Driving history

If you have a good history, you are a low-risk prospect for insurance companies, and hence, there is a possibility that you are eligible for low premium rates. With a good driving history, you also have the power to negotiate deals that are in your favour.

6. Financial history

A good financial history or a good credit score means that you are capable of paying premium rates. It represents the likeliness of you paying the premium on time. Hence, a high credit score can get you low premium rates.

7. Registration location

The premium rates for vehicles in metro cities are different than those in tier two or three cities. Metro cities are looked upon as high-risk locations, and hence, the possibility is that you will have to pay high premium rates. Your registration and your residential location play an important role in determining your motor insurance premium.

To find the best premium rates for your vehicle, you should compare motor insurance online. It gives you more options to choose from and better clarity about your needs. Now that you know what influences your motor insurance premium rates, you can get customised motor insurance that fits your budget. Buy a motor insurance policy that suits your insurance needs from various insurance products and services with Kotak General Insurance.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.