By Ashwini Dubey
Having a close call while driving is common; at the same time, it’s also a stark reminder of how quickly things can go wrong on the road. In those moments, motor insurance can come to one’s rescue. Often perceived as simply a legal requirement, motor insurance is a vital lifeline that protects drivers and their loved ones from the unforeseen.
Whether it’s a fender bender or a serious accident, having the right coverage can make all the difference. For many of us, our cars are more than just a mode of transportation; they’re an extension of our homes, our families and our identities. That’s why motor insurance isn’t just a financial decision, but an emotional one. It’s the reassurance of keeping you and your prized possession safe.
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Buying a car is a special moment. A lot of thought goes into the brand, model and colour. While choosing a car, the cost of insurance is an equally important factor. And it should be. After all, your car insurance premium varies based on the type of the car you buy.
How the premium varies
Various four-wheeler designs are used for various purposes. There are utility-friendly hatchbacks, there are sturdy SUVs and then there are, of course, the slick sedans.
While the type of vehicle doesn’t directly play a role in determining insurance premium, what these models signify in terms of features and segment indirectly impacts the insurance premium. For instance, some SUVs come with a bigger engine size, intricate 4×4 driving systems, and off-road-oriented features that allow them to traverse difficult terrains. This pushes the price of such vehicles and also makes them relatively more expensive than hatchbacks to insure.
On the other hand, when one thinks of sedans, one thinks of style, legroom and space. They can also be expensive if one has a taste for luxury. But does the insurance also cost as much? It depends what you are comparing it with. While hatchbacks will cost significantly less than sedans owing to their low engine cubic capacity, if you’re comparing these to high-end SUVs, the answer is not so straight-forward.
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In recent years, SUVs have evolved to be more compact and, therefore, their price is similar to that of sedans. They also provide a spacious interior, higher ground clearance, high-end equipment and an overall better ride experience. Moreover, the price gap between SUVs and sedans is narrowing, due to which the gap in insurance premium for SUVs and sedans is also shrinking. But for traditional built of SUVs, the premium costs less than sedans but more than hatchbacks.
The bottom line
Cubic capacity of the engine has a vital role to play in third-party premium. For instance, the third-party premium for SUVs and luxury sedans of above 1,499 cc will cost around Rs 7,897 plus taxes, while hatchbacks typically have engine smaller than 1,000 cc and so their third-party premium will cost only Rs 2,094 plus taxes. Since third-party insurance is a mandate by law, it has a direct impact on the premium.
Factors that affect your premium
A sedan that comes with a smaller cubic capacity engine will usually be less expensive than the one with a bigger engine. But that sedan’s brand and model will also be taken into account while deciding insurance premium. Car owners often like to splurge on the look and feel of their vehicle. Any additional aesthetic modifications, in that case, will take the insurance premium a notch higher.
Engine type can also significantly impact insurance premium, and it is generally higher for diesel cars as compared to petrol cars. Other factors like the age of the car, insured declared value (IDV) and add-ons opted also play a role in determining the final premium. The IDV of your automobile and the cost of insurance will both be greater if you decide to buy a fancier and pricey sedan model. But the IDV of your automobile will be lower if you choose to buy a small, affordable vehicle like a hatchback, which will result in a lower motor insurance premium.
Irrespective of which car you buy, you must get adequate insurance cover. Even the most careful drivers can end up with miscalculations on the road. In case accidents happen, the absence of absolute protection will make you vulnerable to financial and legal consequences. So, no matter what car you buy, adequate insurance cover will always be more cost-effective than what you may have to shell out of your pocket in case of an accident.
The author is head, Motor Insurance Renewals, Policybazaar.com