What is Car Insurance Policy and Factors that Determine its Premium
The coverage of the policy i.e. the damage it covers and the amount that is paid in case of damage is mentioned in the terms and conditions of the policy.
Image for representation only.
A Car or Vehicle Insurance policy provides you financial protection in case any damage is caused to your car or vehicle whether owing to natural disasters or accidental. Like every other insurance policy, a certain amount of money called premium has to be paid by the insurer usually on a yearly basis. The coverage of the policy i.e. the damage it covers and the amount that is paid in case of damage is mentioned in the terms and conditions of the policy.
However, the usual wear and tear and mechanical faults and breakdowns are not covered under the ambit of insurance. Your Car Insurance Policy usually covers the losses or damages due to natural disasters (i.e. fire, explosion, lightning, earthquake, flood, typhoon, hurricane, etc.); non-natural disasters (i.e. burglary, theft, riot, etc.) and third Party Legal Liability (i.e. a protection in case your vehicle in involved in an accident that results in permanent injury or death or damage to property).
When you purchase a car, it is compulsory to get buy a Car Insurance Policy as well. At times, depending upon the premium paid, a vehicle insurance policy also includes third person liability and medical expenses incurred i.e. higher the premium amount, more coverage and benefits you can avail.
The amount of premium paid for different types of vehicle insurance differs and depends on the following factors:
- Insured’s Declared Value or IDV
This is a fixed value at which the vehicle is insured and it is the aggregate of the vehicle manufacturer’s selling price which is listed and the cost of any added accessories minus the annual depreciation.
- Car Owner’s Age
The person who is getting the insurance policy also plays a huge role in getting a premium discount and is based on the assumption that as a person grows older he/she tends to be more responsible and doesn’t indulge in rash driving.
- Insured’s Profession
Usually, professionals belonging to certain fields like Doctors, CAs, etc. get a discounted rate of Car Insurance premium.
- Claim History
In case, you haven’t made any insurance claims in the previous years despite having a car insurance, you get a no claim bonus as low as 10% and as high as 50%.
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