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A Step-By-Step Reduction of Your Car Insurance Premium

That is why we wait for the sale season, use discount coupons or shop online – all in an effort to bring down our expenses. What about our car insurance premium? Is there a way to bring it down too?

We care about it. That’s we’ve made this step-by-step guide on reducing car insurance premium.

Car Insurance Premium – Saving VS Coverage

Your car insurance premium is always a considerable sum no matter how cheap your car was in terms of its cost. Being a mandatory requirement (the Motor Vehicles Act mandates a car insurance cover), the cost is unavoidable.

Thus, it is with a heavy heart that we part with our money when buying or renewing our car insurance plan.

It is possible to customize the premium amount of your car insurance policy to some extent. The idea is to not miss out on future coverage in the race of reducing premium costs for the present.

Step 1 – Determine the optimal Insured Declared Value (IDV) of your car.

The IDV of your car is in effect the maximum Sum Assured of your car insurance plan. It is the amount (calculated as the car’s market price minus the depreciation) which is payable to you if your car is stolen or your car is damaged beyond repairs.

As is obvious, the premium rate is determined on the quoted IDV. The IDV varies across insurers and so does the premium rate. The option to select the IDV is solely on you. This chosen IDV should be optimal. Too high and you unnecessarily pay a higher premium, too low and you get a small claim. A balance must be reached and an optimal level of IDV should be selected.

For selecting the optimal IDV, you can deduct the depreciation rates standardized by IRDA from the car’s market price.

Vehicle’s age Rate of depreciation

Less than 6 months 5%

6 months to 1 year 15%

1-2 years 20%

2-3 years 30%

3-4 years 40%

4-5 years 50%

Assess your IDV as per your car’s age and settle on the optimal level.

Step 2 – Consider the coverage available.

Once you have identified the IDV, look at the coverage provided by various plans. Usually a comprehensive policy has two coverage parts – third party cover and own damage cover. Also, there might be riders available which allow you to customize your plan and enhance the coverage. Special consideration should be given to such riders as adding them would increase the premium incidence.

Riders should be chosen based on your requirements. For instance, a zero depreciation cover works wonders for newer cars while an engine protect rider is helpful if monsoons causes water-logging problems in your locality and endangers your car’s engine. Cut down the frills but opt for riders which pertain to your requirement and you can substantially lower the premium.

Step 3 – Assess the optimal premium based on the cover.

The premium for a third party cover is fixed by the IRDA. It is the own damage premium which varies across insurers and is fixed on the IDV of the car. Riders too increase the premium. So, compare the different premium quotes on two parameters – the computed IDV and any additional rider benefits.

Step 4 – Utilize policy discounts and accumulated No Claim Bonus (NCB).

If you are transferring your insurance plan to a new car or renewing your car insurance plan, you can reduce your premium if you have any accumulated NCB in your previous policy. NCB is allowed if the policyholder does not make any claims in the last year. This NCB lowers the premium.

For those who are buying a new car insurance plan, there might be discounts in a policy which should be explored for reducing the premium.

Step 5 – Portability

Blindly sticking to one insurance policy when other plans are offering a lower premium for the same level of coverage is foolish. You should constantly review your car insurance plan on each renewal and if a cheaper substitute is found you should port your policy and enjoy lower premiums.

Following these steps would definitely result in a much lower premium than you were originally charged. This little nugget of wisdom is, therefore, sure to make your pockets and consequently you happy.

This Guide would help you reducing Car Insurance Premium, Optimally!

Factors Effecting Car Insurance Premiums

The cost of car insurance premiums varies significantly from vehicle to vehicle and person to person. In fact, many factors affect the premium that you pay for your auto insurance.

As such, the risk associated with an accident affects the insurance premium largely. The higher the risk, the more you have to pay for the insurance coverage.

Factors:

1. Age: Statistics show that younger people are at a greater risk of confronting an accident as compared to older people. Generally, drivers between the age of 50 and 65 are considered as safe drivers.

2. Gender: Women are supposed to make fewer claims than men and considered to be safe drivers.

3. Driving History: Usually, people with a clean driving record attract lower car insurance premiums.

4. Driver Geography: Your residing address also makes a difference in car insurance premium. People residing in areas that have less traffic are expected to spend less on auto insurance as compared to people living in urban areas that have massive traffic. Car insurance premiums differ from zip code to zip code, depending on the rate of vehicle thefts in the local area. If you reside in a high-risk area, your insurance premiums are expected to be higher.

5. Car Type: Luxurious and powerful cars are usually expensive and are likely to be stolen. Hence, may cost more to insure. On the contrary, a cheap car will cost less to insure.

6. Driving Violations: If you have an accident record, then you are at a higher risk and thus, your car insurance premium will be comparatively higher. You may be penalized by the auto insurance company for as many as five years from the date of the accident. However, your premium will get lower with the improvement in your driving records.

7. Credit Rating: If you have a poor credit history, then the car insurance company will charge you a higher amount of premium. You can work on your credit rating to get a better score. This will help you to save on your premiums.

8. Car Parking: Your car insurance premium will be greatly affected by the place where you park your car. If your car is secured against theft and damage, the premium will be low. So, make sure to park the car in your garage and have a car alarm or a tracking device to pay less on premium.

9. Annual Mileage: The car insurance company will also estimate the annual mileage of your vehicle. This is because the annual mileage of the vehicle gives the insurer an idea of the level of risk associated with an accident. This can affect your auto premium to some extent.

To sum up, before finalizing auto insurance, make sure that you compare the rates offered by various local auto insurance providers to get the best deal in car insurance. You may take optimum advantage of these factors and work on to lower your auto insurance rates.

Determining Your Life Insurance Premium

When you’re purchasing life insurance, you don’t have much say about your insurance premium. It’s decided by the company and your only decision is whether or not to accept their offer.

However, there are some known factors that go into determining the premium. While you can’t control some of them, it will help you fill out your application and talk to the company intelligently if you know what they’re looking for.

Factors You Can’t Control

Age is a primary factor the helps determine your life insurance premium. Younger people will have the best premiums, as older people have a higher risk of dying.

Gender also contributes to your premium. Women usually go to the doctor more often than men, so they catch dangerous conditions earlier, and they typically live longer, so they will pay less for insurance.

Your health history also goes a long way when a insurance company is figuring out your premium. Any diseases you’ve had or have currently, as well as your family history of disease, are all contributing factors. It may be tempting to stretch the truth about your health history when applying for insurance. Doing this, however, puts you at risk for policy cancellation if the company finds out.

Showing that you have recovered from a life-threatening or serious condition, like cancer, or that you are taking care of something chronic, like diabetes, can help lower your premium, depending on the company and type of insurance you’re applying for.

The insurance company will also want to know if you have anything in your past that indicates you might engaged in risky behavior. This includes anything from bankruptcy filings to mental illness. Any risk you’ve demonstrated in the past will cause you to pay higher premiums.

Factors You Can Control

If you’re a smoker, you will pay more for insurance than a non-smoker. Note that this normally pertains to people who smoke regularly and not to those who smoke cigars or pipe tobacco occasionally with their friends.

In addition, your general physical condition, especially your weight, contributes to your life insurance premium. If you are over or under weight for your height, you will pay more. Those with a low-average weight will have the best premium.

What you do for a living and what you do for fun also help determine your premium. If your job is dangerous or you have potentially lethal hobbies (like extreme sports) you will pay more for your life insurance than an accountant who likes to read.

Finally, the amount of foreign travel, as well as the places you’ve travelled to and how long you’ve stayed there, also influence your life insurance premium. If you travel frequently and spend a lot of time overseas, your life insurance will cost more.

Purchasing Life Insurance

Hopefully, knowing these factors will help you as you seek the life insurance and life insurance premium that is right for you, your family, and your circumstances. If you have questions about how your particular insurance company handles one of the issues mentioned above, be sure to ask about it before you purchase the insurance.