What Factors Affect Your Car Insurance Premiums In Pakistan? - Smartchoice.pk

What Factors Affect Your Car Insurance Premiums In Pakistan?

Car insurance is basically a contract between an insurance company and the insurer or car owner, under which the company offers the owner protection against financial losses due to any accident or damage to the vehicle. This protection is offered in return for a premium that the car owner pays periodically to the insurance company.

Car insurance is offered in several forms. It is determined at the time of purchase, according to the insurance selected by the vehicle owner. Most insurances cover:

Factors that Affect Your Car Insurance Rates - What Factors Affect Your  Auto Insurance Premium?

  1. Value of vehicle in case of vehicle theft
  2. Vehicle damage repair charges
  3. Hospital charges in case of an accident
  4. Cost of parts replacement

Car snatching and theft are major challenges for Pakistanis. Over the past few years, there has been a rise in such incidents as there is an active market for such vehicles in Balochistan and across the borders with Afghanistan. There is also a great demand for vehicles as well as stolen car parts. Mafia in specific areas purchase the stolen vehicles and sell them onward.

In most cases, car owners have to make sustained efforts for a long time to recover their assets through law enforcement agencies, and even then, they usually fail to recover their vehicles.

Another common problem that most vehicle owners face is road accidents. The chances of road accidents are also high with a lack of trained and tested drivers and a lack of enforcement of traffic rules. These can cost a lot of money in the form of repairs.

A viable solution to such problems is getting your car insurance. Car owners can claim the amount of the stolen vehicle but can also claim the money for repairs in case of an accident.

How Does Car Insurance Work in Pakistan?

Car insurance in Pakistan is based on the operating practices of insurance companies and regulatory bodies like the SECP and other authorities involved. Most insurance firms in Pakistan charge 2-3% of the vehicle cost as their insurance premium. Every time an accident occurs, or there is any claim on the insurance policy, the owner has to pay some depreciation costs and loses some points on their insurance history.

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According to standard practices, the depreciation cost of the car rises every year of the policy. Factors like the auto market, the economy of the country, and the inflation rate also impact the car’s replacement value. Car owners must keep track of these factors when insuring their cars.

For more details, visit our blog 5 Things to Consider When Choosing Car Insurance In Pakistan

Types of Car Insurance Policies

The following are three different types of car insurance policies offered by most insurance companies:

  • Comprehensive car insurance
  • Third-party liability car insurance
  • Collision car insurance

How to Choose the Right Car Insurance Company

10 Factors Which Determine Car Insurance Premium?

Most people shop around to get the cheapest insurance policies offering the best replacement values. However, car insurance rates have risen quickly during the last few years due to rising inflation and interest rates. The volatile economic situation and increasing rates of road accidents have also influenced the rise of insurance rates.

When choosing a car insurance company in Pakistan, you must keep the following factors in mind:

  • Determine your needs first
  • Make a list of authorised insurance companies
  • Check third-party ratings
  • Consider their experience
  • Compare insurance quotes
  • Look for the services they offer
  • Get your car inspected for an estimate of the coverage that you may need in the future
  • Check for discounts offered by different car insurance companies
  • Choose the company that has minimum requirements·
  • Consider insurance companies that offer the lowest premium for different types and conditions of the vehicle

For more details, visit our blog  Why Car Insurance Has Now Become an Important Aspect in Pakistan

Methods of Insurance Reimbursements

In Pakistan, there are two methods for insurance reimbursements:

  • If you pay for the damages yourself, you have to produce the payment receipts and proof of damage to the insurance company. They will reimburse your payment later on or update your current insurance plan.
  • If you cannot pay for the repairs, the company will pay for the workshop directly.

What Affects Your Car Insurance Premium?

Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.

The Car Model Insured

Certain types of cars cost more to insure. For instance, Toyota Corollas and Suzuki Mehrans are notorious for being high-risk cars. However, if you drive a vehicle with built-in security features, such as anti-theft devices, you may qualify for discounts on your car insurance premium.

Your driving habits

If you’ve been in multiple accidents, your car insurance cost is likely higher than someone with a clean driving record. If you’re a new driver and have not had insurance before, chances are you’ll pay more for car insurance.

How much you drive

Insurers typically look at how much you use your car. Someone with a long commute to work may pay more for insurance than someone who only uses their vehicle to run errands on weekends — since more miles behind the wheel mean more exposure to risk.

Demographic factors

Where you live and park your car

Where you live and park your car overnight may affect your car insurance premium. Urban neighbourhoods typically have higher rates of accidents, theft and vandalism than more rural areas, which means premiums may be higher.

Your age and gender

Your age and gender also impact your car insurance premium. Younger, less experienced drivers often pay more for car insurance than older drivers.

The Type of Coverage

The coverage you choose may affect the cost of your car insurance premium. Coverages that are also typically included in a car insurance policy are comprehensive coverage, collision coverage, uninsured/underinsured motorist coverage, and medical payments or personal injury protection, depending on the state. You may also want to consider optional protections, such as towing and labour costs, rental reimbursement and sound system coverage.

Your limits and deductibles

A limit is the maximum amount your policy will pay toward a covered loss. Typically, each coverage in a policy has its own limit, and you may be able to adjust it based on your needs. You’ll likely find that the more coverage you purchase, the higher your premium may be. Your deductible — the amount you agree to pay before your insurance kicks in to help pay for a covered loss — also plays a role in the amount of your premium. Generally, you may find that setting a higher deductible means you’ll pay less for your policy.

Your insurance provider can help you decide which limits, deductibles and coverages are right for you. They can also help identify any discounts for which you may qualify.

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