Your Car Insurance Premium is Determined by These 5 Factors
Posted At June 12th, 2018
Basically, there is a fee to be paid when transferring a risk of loss to the insurance company. That fee is known as an insurance premium.
The premium is a certain amount of money to be paid periodically (monthly or annually) by the insured for purchasing the insurance. All types of insurance require such payment of premium, including car (or motorcycle) insurance.
The premium rate to be paid for a motor vehicle insurance is predetermined by the insurance company based on the consideration of the conditions of the insured.
Factors Determining the Premium Rate
Every insurance company has its own rules in determining the premium rate even though the Financial Services Authority (OJK) has set a lower and upper limit for the premium rate percentage. However, the insured must also know the factors commonly used as the basis to determine the premium rate for motor vehicle insurance by insurance companies.
Here are some reviews regarding the factors determining the premium rates of motor vehicle insurance:
1. Type of Coverage (All Risks or Total Loss Only/TLO)
The premium for All Risks coverage is surely higher than the premium for TLO. Even more so if the All Risks coverage is added with other coverage extensions (comprehensive).
2. Type of Vehicle
The vehicle’s specifications, condition, usage, and market value are taken into consideration in determining the premium rate.
The domicile of the insured also affects the premium rate. If the insured resides in areas prone to natural disaster or high criminality rate, then premium rate is surely higher.
If the insured’s age is under 30 (<30) years old and above 60 (>60) years old, the premium rate would likely be higher because he or she is deemed to be more prone to carelessness. Accident statistics show that people in these age groups have the higher risk of accident.
5. Other Factors
Other factors used as determinant are the insured’s driving track record, additional security system in the car, and so on.
These are some of the factors used to determine the premium rate of motor vehicle insurance, which any insured party should know in order to have a better understanding on how to calculate a premium.
Increasing your understanding may help you find ways to reduce your Motor Vehicle Premium Rates.
Topics Articlecar insurance total loss only insurance premium all risks
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