How classification of cars impacts your insurance policy

Buying and maintaining a car is expensive. You cannot risk an accident or damage and pay out of pocket each time. If this happens, a car will become an unaffordable liability better left for the affluent. Buying an insurance policy comes with several considerations, and the premium on policy also varies depending upon the type of car you own.

Impact of car type on the third-party premium cost

The third-party car insurance is the legally required part of car insurance. If you meet with an accident, and need to compensate the victim (either third party or need treatment yourself), the insurance company, rather than the owner (that is, you), will pay the amount. The Motor Accident Claims Tribunal awards hefty compensation and, therefore, third-party insurance ensures that the victim receives this money without burdening the vehicle owner. The Insurance Regulatory and Development Authority of India (IRDAI) regulates this process. The regulatory body also declares price of the third-party cover for the vehicle. Similarly, IRDAI determines the premium of a third-party insurance policy in three price brackets, depending upon the engine size.

• Cars having engines with a cubic capacity of less than 1000 cc have the lowest premium cost for third-party insurance.

• Cars having engines with a cubic capacity of more than 1500 cc have the highest premium cost for third-party insurance.

• Cars, which have engines with a cubic capacity of more than 1000 cc but less than 1500 cc, will have their third party premiums priced somewhere between the price of premiums of the above policies

Impact of car type on own-damage premium cost

The own-damage cover of your policy protects your car and compensates you in case of an accident, theft, or damage due to any natural calamity. In this regard, there are many aspects that decide the price of a car insurance policy.

• Generally, the segment type of your car becomes the primary factor to determine the IDV, which, then, has a direct impact on the premium amount. So, it will be understandably cheaper to buy car insurance for smaller cars with lower purchase price.Let us say a person buys a A segment car, which costs less than Rs. 5 lakhs, and another person buys a C segment car, which costs Rs. 10 lakhs; the premium will certainly be less for the cheaper car.

• Many companies decide the premium based on the car’s body type. While this varies with each company, an estimated order of increasing cost of a policy, when you buy car insurance, can be as such:

• Hatchbacks will always be cheapest to insure because of their size and large sales volume.

• Insurance for sedans tend to cost a bit more than hatchbacks depending upon their actual price bracket.

• SUVs and people carriers/MUVs are among the most expensive to insure among the consumer-segment cars.

• Premium hatchbacks and sedans will have even higher policy costs because of their higher price, even if their body type is small.

• Sports SUVs, luxury SUVs, sports sedans, supercars and hypercars are the most expensive to insure because of their high costs as well as the expensive engineering involved, which might leading to costly repairs.

Getting your car insured may seem like a chore but, trust us, it is much more than a necessary expense. You will not realise the advantage of having an adequate policy unless you need it.

Every paisa invested in buying car insurance is worth it when you don’t bear all the repair and compensation costs out of pocket. A well-loved car deserves equally valuable car insurance. So, make sure to get the best policy from the best insurance company.