Health, home, motor insurance premium: Here’s how your address can determine how much you pay

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Published: March 15, 2017 2:34:22 AM

Your current location of residence and pin code shares a fair bit in deciding the premium, as it underwrites the exposure to risk.

Premium for motor, health and home insurance may differ because of the place where you stay

Though there are numerous factors to consider while calculating the premium for an insurance policy, the primary ones are – first, from whom you are purchasing the plan and secondly, how much sum assured you are insuring for. There is one more key factor that plays a part but largely goes unnoticed – where you live.Your current location of residence and pin code shares a fair bit in deciding the premium, as it underwrites the exposure to risk. Let’s look at some of the insurance categories where the premium may change because of the place where you stay.

Motor insurance

The city where you register your car influences the amount of motor insurance premium you pay. ‘Insurance zones’ are created by insurers, depending on the vehicle’s exposure to damage or loss. Because of the high probability of theft and accidents in metro cities, urban drivers pay more for car insurance than those living in small towns or rural areas.

The zone difference generally comprises metro cities and the rest of India. For example, if you purchase a Honda Brio, and opt for motor insurance with zero depreciation. In that scenario, the difference in insurance premium in an urban city and a rural town can be anywhere between 3% and 5% or even higher in some cases, offering the same IDV and other features.

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Health insurance

Life in metro cities is always on a faster pace than in countryside and so is the pace of expenses in the cities. While a hospital in Delhi will charge you a minimum of R2,000-3,000 room rent for a day, hospitals in tier II and tier III towns of the country will charge much lesser. Moreover, there is a large difference between doctors’ consultation fees in a metro city and tier II city.

At the time of calculating the health insurance premium, your insurer may infuse all these factors, resulting in difference in the premiums of same age group.

For example, there are two families of exact same age group; one living in Delhi and another in Mysore with three members in the each family. If they purchase a health insurance plan of Rs 10 lakh cover with restoration benefits, Family 1 living in Delhi will have to pay a premium of around Rs 16,000 while Family 2 in Mysore will pay around Rs 13,000.

Home insurance

Home insurance includes two things; the structure of the house and content in the house. Certain places are considered to be disaster prone due to which the structure of the house may possess a higher risk to any natural calamity and on another hand frequent incidence of theft and burglary at particular locations may also increase the exposure to risk.

The risk exposed to the house will ultimately increase the premium you pay for the home insurance. For example, home insurance in Chennai with a cover of Rs 50,00,000 can cost you an annual premium of around Rs 6,600 while the same insurance of a similar sum assured for an identical house located in Delhi will cost you an annual premium of around Rs 6,750.

Your place of residence makes a significant impact on your vulnerability to risk as well as on how much you will be required to invest in order to protect you and your valuables.

While life is all about making choices, understanding the kind of risk that you might be exposing yourself to by staying at a certain location is always a good idea.

The writer is co-founder and CEO, PolicyBazaar.com

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