Buying a car insurance policy certainly involves a lot of calculations and deliberations before you can work out and choose a plan that suits your vehicle the best.
While it is great to buy a comprehensive car insurance plan with useful add-ons and features, it is also important that you consider the amount of premium you would have to pay each month so that your expenses do not exceed the utility of your insurance cover.
What is Car Insurance Premium?
Car insurance premium is the amount paid towards the total cost of your insurance policy. It is the sum paid to the insurance company to cover your vehicle against untoward incidents.
Are Premiums Static Or Will They Inflate Over Time?
You might often get confused upon noticing that your car insurance premium has increased over the years without any fault on your part.
It is interesting to note that the inflation in the amount of premium each year is affected by a variety of factors even though you pay your premiums on time.
Take a look at the factors that can cause a rise in your car insurance premium each year.
1. Previous Claims
If you have settled any auto claims previously with the insurer, it creates the impression that your vehicle is risk-prone. In such a case, the insurer might increase your premium amount to commensurate it with the quantum of risk involved.
2. Medical Condition
If over a period, you, as the insured, develop any diseases such as diabetes or heart ailments, the insurance company is bound to charge higher premiums from you for the simple reason that you pose a greater risk as a driver now. As a result, the insurance company needs to adjust your cover amount in proportion to any such contingency.
3. Wear and Tear of Vehicle
If you are a frequent driver, your vehicle is bound to experience some amount of wear and tear. Insurers consider this an important factor while deciding on the premium amount. For cars that have travelled a certain number of miles in a year or those whose make, and model is old, insurers charge a premium more than the normal amount to balance their liability in case of a claim.
You will often find that premiums for insurance policies in areas where traffic is low are quite cheaper when compared to metropolitan cities or places that witness high traffic. This is because there are greater chances of accidents and mishaps in the case of the latter and therefore insurance companies have to be financially prepared to deal with liabilities arising from such cases.
5. Age of the Driver
Age is also an important factor while deciding on the premium amount. Younger drivers pay a reduced amount as premium. As your age increases, so does your premium amount as insurance companies are often sceptical about selling insurance policies to the elderly, given their deteriorating physical capacity and medical conditions.
Will The Premiums Spike At The Time Of Renewal?
Your insurance premium is bound to rise on account of the factors mentioned above. However, here are a few ways how you can prevent a steep rise in the amount payable as premium amount:
1. Avoid Claiming Petty Damages
Check the amount of repair that you would incur in case of damage. If the amount is petty, avoid filing a claim since it might form a negative impression on the insurer leading to higher premium costs in the future.
2. Safety Equipment
Installing safety equipment in your car can reduce your insurance premium to a considerable extent. For instance, installing a gear lock or a steering lock can work to your advantage, and it displays your sense of prudence and responsibility.
3. Online Insurance
Since online insurance involves minimal documentation, both at the time of purchase and renewal, you stand a better chance to save up on yearly increase in premiums. You can visit insurance aggregator websites such as Coverfox.com, which allow you to buy the best insurance online by comparing a range of policies from reputed insurance companies.
4. Loyalty towards Insurer
It is advisable that you choose an insurance partner that you have previously associated with on other insurance policies. This is because insurance brands reward customer loyalty in many ways, with one of them being, ensuring and controlling the rise in the premium amount in subsequent years.
Make a wise choice while buying car insurance and drive responsibly to avoid paying inflated premiums. Ensure that you maximize your utility from your motor insurance policy.