Can Your Vehicle Insurance Premium Change Over Time?

8 min read Posted on 30 May 2024

Owning a car is not easy. The expenses related to maintenance and fuel are high, especially after the war. And on top of that, there is the monthly motor insurance premium to care about. While it is required by law in India, it is also wise to get your car insured before it expires. And at the time of renewal, the premium amount may differ from what you paid the previous year, depending on various factors.

The concept of insurance premiums can be confusing because it is commonly stated that if you have yet to make any claims or your car is old, your insurance premium should decrease. Even those who have yet to file a claim face higher premiums. Why? What is causing the premium to rise with each passing year? So, let us understand the factors.

Why Do Premiums Increase?

In India, the Insurance Regulatory and Development Authority of India (IRDAI) primarily governs vehicle insurance premiums and ensures that insurance policies meet the necessary standards.

One of the most common types of coverage, third-party insurance, is mandated by the Motor Vehicles Act of 1988. This policy protects against losses and damages caused to third parties in the event of an accident. The IRDAI regulates the premiums for these policies, adjusting them based on factors, such as vehicle wear and tear, age, and others.

When your renewal premium changes, it's usually because:

• Your driving behaviourbehavior impacts risk levels and, consequently, the premium.
• As your vehicle gets older, the risk of damage or accidents increases.
• The extent of coverage you choose affects your premium.
• Where you live also influences the cost due to regional risk variations.
• Insured Declared Value (IDV) of your vehicle can fluctuate with the market value of your car.

Third-Party Car Insurance Premium Rates

Standalone self-damage and comprehensive car insurance premiums are set by car insurance companies and vary from policyholder to policyholder. Third-party car insurance premiums are set by IRDAI and depend on the vehicle's engine size.

The third-party insurance premium rates below were last updated on June 1, 2022, by the IRDAI.

How to Reduce Your Car Insurance Premium

Motor insurance is a necessity and to ensure that you get the best premium, there are certain factors that you can consider. Here are a few:

• No-Claim Bonus: You can receive the No Claim Bonus (NCB) in the cost of your car insurance for the following year if you don't file a claim in the current year. If you don't file a claim for three to five years, the discount could increase from 30% to 50%.
• Compare Car Insurance Online: mainly car insurance companies offer online insurance services. You can buy car insurance online by comparing various policies from different insurers.
• Vehicle: which car you are driving also matters a lot. If you have a high-end luxury vehicle, the premium will be more. It is because the price of the car is high and thus, the services related to it, in case the insurance company has to pay for the repairs.

Reasons Why Car Insurance Premiums Rise

Have you ever wondered why auto insurance costs increase each year? In this section, let's examine a few prevalent explanations:

• Inspection of Car: If a significant amount of time passes between the date your policy expires and the date you apply for a renewal, your insurer might inspect the four-wheeler before renewing the coverage.
• Risk Profile: Anyone with a high-risk profile makes untrue claims or has engaged in the illegal use of a vehicle. Furthermore, anyone who has a history of filing claims related to accidents can expect their insurance costs to skyrocket.
• Switching the Insurer: Although you can change insurers, doing so might result in higher premiums. However, the costs can also decrease if you do extensive research before purchasing a plan.

Bottom Line

Now that you know what causes the rise in car insurance premiums, you can use the information to work on the factors that are in your hand and save a good amount of money. You can always decide to abide by the advice that will lower your car insurance costs.

Disclaimer: The content published in this article is intended solely for the readers' informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. It is advisable to seek advice from a qualified professional regarding specific concerns. The details provided regarding the plan are for reference purposes only. Please visit the insurer’s website for the latest updates on the plan. The company does not guarantee suitability, reliability, timeliness, or accuracy of the information, services, or any other aspects mentioned in this regard for any purpose. We do not endorse any insurance company or insurance product provided by any insurer.