How Do Car Insurance Companies Calculate Premium
It all starts from the questions that you fill up on the proposal form. Insurance companies have fixed a premium that they want to charge you but they will offer you a lower or better rate based on the certain criteria that are favourable to them.
Below are some factors that influence the premium that you pay for your car. (See: How to Save When You Buy Car Insurance )
Valuation Of Your Car
The value of the car will determine how you will be charge for your car insurance premium. The amount that you are compensated for under a Comprehensive motor insurance coverage directly linked to what is the value of the car at that point in time.
(The value of a new car is more than a car that is on the road for more than 3 years.)
Accessories like a music system or speakers are additional items that will add value to the price of the car. But it depends if the insurers want to cover it. Do not assume they will and do declare to them if you want them to cover it.
Engine Capacity Of The Car
Every car has an engine size, which is measured according to it engine capacity. The size of the engine affects the insurance premium. Do take note that car with turbo engine will be charge higher even though they have a lower engine capacity.
Good Claim Record
No Claim Discount is a discount factor that you are entitled to when you did not make a claim. Insurance companies will give you a discount every year if you don't make a claim, up to a maximum of 50% – and this is transferrable across insurance companies as well if you decide to switch.
The nature of your job can affect the cost of your car insurance premium. For example, admin executive only need the car to and from work but a sale person will have to travel to different locations to meet customers to hit his/her sales target. This will greatly increase the probability of getting into an accident which is a deterrent to insurance companies. (See: Occupation that will reduce your car insurance premium)
Own Damage Excess
This is how much your insurance companies will expect you to pay before they pay off the difference of your car accident repair. The higher the excess, the lower the premium.
Type Of Cover
There are 3 types of cover.
1. Comprehensive Insurance Cover
2. Third Party Fire & Theft
3. Third Party Only.
Comprehensive insurance cover is the most expensive among all of them but it covers your own damage claims, third party claiming against you, total loss due to fire and theft.
Third Party Only premium is the lowest, however, it does not cover any other cover other than third party claiming against you. (See: Is Third Party insurance cover really the cheapest car insurance)