Most of the people having car might have faced the issue of car insurance renewal premiums going up at the time of renewal. The premium for car insurance goes up drastically at the time of renewal and people are dumbstruck to understand the reason behind this. Some of the commonly asked questions are: - Why is my car insurance renewal premium so high? Why did my
car insurance renewal quotes premium go up for no reason? Does car insurance premium increase every year? Do auto insurance premiums increase with age? When do car insurance premiums go up? Car insurance doubled for no reason etc., Car insurance comparison is to be done before finalising the car insurance renewal premium.
It is known to everyone that Car is a liability and its value decreases each year due to the wear and tear caused by the usage of the car. So as per the logic the premiums should go down each year as the value of the car is depreciated but in contrary to this the premiums see a rise for each passing year.
Why did my car insurance renewal premium go up this year? I had no claims made in the last year.
Now lets us understand the reasons behind this yearly increase in the premium of the car.
- Increase in Third Party Rates: Third party car insurance rates are decided by the IRDA and are subject to change from time to time. The rates are increased once in a while after taking into consideration of few factors such as the Claim ratio, premium collected etc. This increase in third party premium rates can contribute to the increase in premium to be paid at the time of renewal.
- Geographical Location:
Insurance companies decide the car insurance renewal premium based on the geographical location of operation of the vehicle. If a particular location experiences a high loss ratio, then the premiums for vehicles from that location will be increased to compensate the loss and maintain the claim ratio.
- Age of the Car:The age of the car decides the car insurance calculation as the cars are classified into 3 categories of ages for the purpose of premium calculation. They are: Car aged up to 5 years, Cars aged more than 5 years but less than 10 years, Cars aged more than 10 years. As the age of the car increases so does the wear and tear. Depreciation increases with age and is directly related to the premium. This also influences the online car insurance premium.
- Riders (Add-on): A rider also called add-on is like a topping on the cherry. Each rider comes with an extra premium which is to be paid in addition to the base premium. The add-ons premium increases each year and so the overall premium increases each year if add-ons are opted. For example, let us assume the Nil Depreciation add-on premium for a new vehicle is Rs.5000. At the time of renewal if insured is opting for nil depreciation the add-on premium increases to Rs.6000. This is due to the fact that the depreciation is taken into account while setting the premiums.
- Claim: If there is a claim in the previous year then the
no claim bonus becomes 0%. The no claim bonus is discount given under the Own damage section for those customer who didn’t make a claim in the previous year policy. In case no claim bonus is available at the time of renewal the renewal premium doesn’t go up.
- IDV: IDV stands for
Insured declared value which is the sum for which the car in insured. If the IDV is increased at the time of renewal, then the car insurance renewal premium also increases. IDV increase is directly proportional to the increase in premium
- Make & Model: Insurers have their own preferred make and model cars as well as non preferred make and models. For preferred make and model of cars there are heavy discounts available while for the not preferred the discounts are low or sometimes loaded with extra premium. This preference can change each year or periodically for insurers depending on the way the formula insurance companies follow.
Click on Policybachat to know more about the increase in renewal premiums. Calculate your car insurance renewal insurance premium using the car insurance renewal calculator. Car insurance comparison can be done and car insurance renewal quotes are obtained for which best quote can be selected, premium paid and car insurance policy can be generated online.