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Factors That Affect Your Motor Insurance Premiums

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Will filing a car insurance claim increase your premium outgo? This has been a widely discussed topic in the insurance realm and strangely, most people are unaware of the aftereffects of filing a vehicle insurance claim. Whether the accident that caused damage to your car was your fault or not, the car insurance company takes into account the number of claims filed by you at the time of policy renewal. This surely will have an adverse impact on the insurance premiums. So, the rate hike or rate cut in premiums is decided in relation to the number of claims filed during a policy year. But on the whole, your car insurance premium depends on a large number of factors. A common few are discussed below.


When does the insurer hike rates?

Insurance companies decide the premium rates based on the severity of risks involved with a particular make or model of the vehicle. They maintain statistics with respect to claim ratios of different vehicles and fix the premium rates based on the same. Note that the safety rating of your vehicle is based on the advanced safety features such as airbags, traction control, backup sensing system, automatic safety belt, etc. However, your car insurance premium also depends on the following factors:

  • Your insurance premium depends on the place you live in. So if you live in a densely populated area, you are likely to pay a higher premium amount as such places are considered accident prone.
  • An increase in third party premiums and service tax can have an impact on your car insurance premium.
  • Your credit score too has a role in your insurance premium calculation. Generally, people with low credit scores are charged higher premiums by insurance companies.
  • Companies also look upon your profession and adjust the premiums depending on the risk factor associated with your profile. For example, if you are a sales person, then you will probably spend more time on road compared to an average driver.
  • The size of your vehicle will affect the premium amount you pay. Usually, insurance companies consider larger vehicles to be safer than the smaller ones. So even with similar safety ratings, a smaller car might attract a slightly higher premium amount. But on the other hand, vehicles with larger engines have higher premiums.

When to file an insurance claim?

There are no clear-cut policies that decide the insurance premium rates. So when one company increases the premiums for higher number of claims, other firm might just go lenient about it. However, as a general rule of thumb, keep the number of claims low to avail greater benefits on your vehicle insurance policy. For example, your insurance company will offer bonuses for every claim-free year. If you have accrued enough no-claim bonuses, then your insurer might even reduce your insurance premium to half. But as already said, it all depends from company to company and the type of car insurance policy you purchase.


Always keep in mind that reducing the number of claims is the key to lowering your insurance premiums in the long run. But this doesn’t mean you must bear the cost of heavy repairs in case you meet with an accident. Doing so, will ruin the whole concept of vehicle insurance.

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