Car insurance is of two types – one is the mandatory liability insurance or third-party insurance, which is a legal requirement and must be in place the moment the car strikes the road from the showroom. It also applies to buying used cars. The insurance provides cover to third parties but not to the car owner or the car. The only benefit for car owners is that the insurance company will bear the cost of damages for the affected parties in case of an accident. The statutory insurance does not cost too much.
To protect the car as well as the driver, it is necessary to take another car insurance. It must have the option of comprehensive coverage for any damages to the vehicle and the driver. The insurance premium for full car insurance will depend on many factors that the insurance companies consider. Several factors can affect the cost of insurance. It can include the type of coverage and its extent to the kind of vehicle, factors related to the driver, and those related to the insurance companies.
Although all companies do not use the same parameters for evaluating cars and drivers there are some common factors too. What these factors are will become clear on going through this article.
The Car Factors
The car is the first consideration of insurance companies when calculating the premium payable. The higher is the cost of the car; higher will be the insurance premium. It is natural because the insurance company considers the sum to pay in the event of any damage as the cost of parts as well as repairing costs will also be higher than an ordinary car. The insurance company would ask you to provide the following information about the vehicle or sometimes pull the information from the VIN number.
To keep insurance costs low, you must look for the best cars for cheap insurance. However, the following factors would come into play for calculating the premium.
The car manufacturer is one of the factors that affect the insurance cost because many times, the reputation of the car manufacturer has links to the price of the vehicle or its value. Domestic car makers are better as the insurance cost is lower than what you would pay for any foreign car. One of the reasons for the higher insurance cost of foreign cars is that the parts availability of such cars can be difficult, and only fewer body shops could be capable of working on it.
Car manufacturers have a way of branding cars. First, they name a model of a car, which becomes the base model on which they build the brand, which can take a few years. Then, depending on the kind of acceptance the brand receives, the manufacturer might introduce its variants with the same name but an extension that defines the new identity. With each upgrade, the manufacturer adds new features to the vehicle, and the cost increases, which in turn increases the cost of insurance.
Passenger Safety features
Vehicles come with two types of safety features – passenger safety features and vehicle safety features. For insurance companies, it is reasonable to prefer cars with better safety features because it would minimize the risks of damages and keep the payouts low, which is beneficial for their business. If you have an older vehicle without airbags and the advanced safety features of the present models, then despite the car being less costly, you will end up paying a higher premium even for personal liability and property damage or third-party insurance. On the other hand, if you own a car of the latest model with state-of-the-art safety features, you can save some money on insurance. Insurance companies consider older car models riskier, with higher chances of causing damages that lead to higher insurance costs.
Vehicle safety features
In addition to the risks arising from damages to cars from accidents, insurance companies also consider the risk of car theft when working out the insurance premium. Adding more anti-theft features to the car is a way of reducing car insurance premiums as it lowers the risk of car theft. Installing a car alarm that blares if someone tries to break into the car attracts insurance discounts when you are taking a comprehensive insurance policy that provides coverage against car theft. The amount of discount will depend on the cost of the car and the area where you live. If the area is prone to car thefts, the discount will be low. But still, a discount is a discount no matter how small it might be.
Year of make
The age and make of your car can impact car insurance premiums. Old cars might appear to attract a lower premium, but it can also be true for new cars because some insurance companies offer a new car discount.
Other Vehicle-Related Factors
In addition to the above factors, there are some other things that insurance companies consider, and knowing what these factors are should help to work out ways for keeping the premium low.
The extent of coverage
This is a significant factor to consider because you have ample scope of lowering the insurance cost by choosing the most appropriate cover. You can cover every inch of your car by envisaging the worst possible damages that can happen, but then you will have to spend a fortune on it. Taking a pragmatic approach helps to keep the cost low. You must assess the maximum possible damage that can happen under normal circumstances instead of thinking of the worst scenario, which has very remote chances of occurring. Knowing what is essential for you will help to arrive at the right coverage.
How many vehicles to cover
Insurance companies usually offer discounts if you cover multiple vehicles. A multi-car discount is available for liability coverage of more than one car.
Among all the above factors, the cost of the car is the most important one that drives the cost of insurance, and if you are buying an expensive car, despite the discounts, be ready to pay a higher premium.