July 22, 2021

Thinking of buying that dream car of yours? Insurance is an inseparable part of purchasing any car as it helps you protect the investment you make in your vehicle. Purchasing an auto insurance is nothing less than making an investment. The premium you pay today will fetch you return in the future in the form of protecting you and your vehicle in case of any untoward incident.

For calculating auto insurance premiums, insurers and dealers divide cars into various auto groups. The amount of premium depends on this classification. In this article, we will give a sneak peak into this classification to understand in which segment does your choice fall and approximately how much premium you might need to shell out to protect yourself and your beloved car.

Classification of cars

The following are the classifications used by car manufacturers, dealers and insurers:

Microcar: This segment is a popular segment among people who are switching from two-wheelers to four-wheelers. These are usually two seater vehicles with the engine capacity of less than 1 litre. The prices of these cars is the lowest and so are the insurance premiums.

Hatchback: Slightly higher in price than Microcars, this next segment of cars has a five-person capacity. They do not contain an extended boot. The insurance premiums will be higher than Microcars but affordable.

Sedan: These cars also have a five-person capacity, however, they have an extended boot and visually look longer than hatchbacks. Their prices are higher than hatchbacks and so are the premiums.

SUV: SUV is the short form of Sports Utility Vehicles. These are cars which can accommodate five to seven people and are designed to be driven on rough surfaces. They are good for travelling and road trips. Prices of SUVs vary depending on features and make. Now in India, SUVs are available which are priced similar to Sedans or even lesser than some of them. The premiums will be commensurate with the prices.

MPV: MPVs or Multi-purpose vehicles are big sized cars which can be used for carrying groups of people. MPVs are available in all price ranges and start from as low as the price of a premium hatchback. The insurance premiums naturally also vary depending on the prices of the vehicles.

Luxury Cars: Luxury cars are expensive cars which can be Sedans or SUVs. As the name suggests, these cars are high class cars with sophisticated features. These cars are costly, but very comfortable. The insurance premiums for these vehicles are also comparatively higher.

Additional Reading:- Role of Insurance in Buying or Selling of an Used Car

Requirement for insurance of cars

Now that we have explained the different vehicle groups, let us now have a look at why insurance is required for all types of vehicles.

Insurance coverage is essential to protect your vehicle from any untoward incident. As per the Motor Vehicles Act 1988, no vehicle can be driven on the road without a proper medical insurance coverage. The things covered under vehicle insurance include accidents, explosion, fire, theft, lightening, riots, natural calamities, terrorisms and strikes. Car insurance also covers financial liability in case of death or injury of a third person or damage to any property.

Factors affecting insurance premium of cars

The factors which vehicle insurance includes the following:

Car model, make and variant: This information is important for calculation of premium for insurance. The more expensive the car, the higher is the insurance premium. For example, the insurance premium of a Sedan is higher than the insurance premium of a hatchback.

Fuel which runs the car: It is surprising, but true. The fuel which runs the car affects the insurance premium of the vehicle. For example, vehicles which run on CNG attract higher premiums than vehicles that run on petrol or diesel.

Manufacturing Year: The manufacturing year of a vehicle also affects the premium amount. The newer the car, the lesser is the insurance premium.

To conclude, we would like to share certain things that you need to keep in mind while buying insurance for a car. Find out from your agent what is the basic premium while buying a new car. In the case of used cars, there may not be a comprehensive coverage and hence the premiums might be higher. It is always advisable to stick to the same insurance company for all general insurance needs. Companies provide discounts for loyalty. Compare insurance policy features before making the purchasing decision. Finally, insurance policies contain a number of hidden terms and conditions. Read all the documents carefully and then sign.

Additional Reading:- 8 Tips For Car Insurance Policy Renewal


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