Ways to Reduce Your Insurance Premium

What are the ways to reduce insurance premium?

If you cannot avoid the risk of your vehicle getting damaged on the road, you can at least minimize the losses occurring out of an unfortunate accident. The easiest way of doing this is to get car insurance. Once insured, you can rest assured that if your vehicle gets damaged, the insurance company is there to cover for the financial losses occurring out of it.

Now, this is not a one-time affair and requires for some financial outlay every year. There is no way to avoid this annual expenditure (unless you terminate the insurance policy) but there are a few ways through which you can reduce your premiums. We are discussing them in this story.

Ways to Reduce Insurance Premium

  1. Choosing the Correct IDV: IDV or Insured Declared Value is the value of your vehicle which is insured by the insurance company and it is the maximum amount the company will pay in case of a claim. It is the depreciated value of the vehicle depending upon its age. An insurance company uses this value to calculate the premium for the insurance policy. Many insurance companies give you an option to alter this value at the time of renewal. To keep your premium low, you can set a lower IDV of your vehicle. But you should bear in mind that the lower you set the IDV, the lesser you will get at the time of a claim. So, ideally, it should be set to an optimum.
  2. No Claim Bonus or NCB: If you have not claimed for two wheeler insurance of your vehicle over a period of one year of holding an insurance policy, the company gives some discounts on the next renewal premium payment. This is called as No Claim Bonus. This discount increases every year till the time you do not make a damage claim and can go up to 50% of the own damage part of the premium amount. So, you must submit a claim for insurance only if the damages to your car are significant and should avoid it for menial repair jobs.
  3. Voluntary Deductible: This is the amount which one agrees to pay himself in case of a claim. The remaining amount is covered by the insurance policy. The higher the voluntary deductible proportionately lower will be your premium. For example, you select a Voluntary Deductible of Rs 5000; your premium amount will be reduced. If you do not make any claim this year, you end up saving. However, if you make a claim of, let us say, Rs 10,000, you will have to bear your voluntary deductible (which is Rs 5000 in this case) and the remaining amount will be paid by the insurer. Hence, you must choose a deductible amount depending upon your affordability and try to strike a balance such that the premium reduces but the burden on your pocket does not become a lot in case of a damage claim.
  4. Renew before the policy lapses: If you want to keep your premiums at minimum, you should renew your policy before it expires. If you do not do that, you will have to buy a new policy all over again. This may entail additional costs like an inspection cost by a surveyor who will come and physically and visually check your vehicle to ensure that there is no damage during the lapse period. This cost will end up being added to your premium. Additionally, some insurance companies also offer discounts if the policy is renewed before its lapse.
  5. Look for addons and choose wisely: Insurance companies offer many addons with a policy and each of these increase the premium amount. You should be careful enough to check what all addons the company has added in the renewal quote and choose only those which are needed. Others can be easily discarded, and this will end up reducing the premium amount.

Apart from this, there are discounts if your vehicle is equipped with an approved anti-theft device or if you are a member of the Automobile Association of India etc.

These are some of the ways in which you can reduce your premium outlay easily. Insurance, these days, has become one of the most important financial instrument. It provides so much protection against financial losses in case of untoward incidents which you may not expect to happen. You may be extra cautious but you just cannot be immune to these risks. So, by spending small amounts periodically on insurance, you can easily limit the damage these incidents can cause, at least, on the financial front. Being aware of different options to reduce premiums will help you to minimize these spends and at the same time remain covered by the benefits insurance offers.