Come April, the premium for third party cover in your motor insurance policy is likely to go up. Consequently, your annual premium for small cars (not exceeding 1,000-cc), such as Maruti’s Alto model, could more than double from ₹941 to ₹2,227!

The third party cover for damage to a third party and/or their vehicle is mandatory and the rates are set by the insurance regulatory authority based on vehicle size. For instance, the annual premium for a private car exceeding 1,500-cc in capacity, such as a Toyota Corolla Altis, is currently ₹3,424. This applies no matter what your car costs and which insurer you go with.

These premiums are revised at fixed intervals by the regulator based on inflation, losses made by insurers and compensation awarded by the judiciary in motor accident cases. Any rise in these parameters generally leads to higher premiums. The insurers also have to contend with a 27 per cent increase in the average amount claimed in the eventuality of death in 2012-13 vis-à-vis the previous year.

Easy savings Although you can do little about the increased third party premiums, you can do quite a bit to reduce your overall premium outgo. This is because your overall auto insurance premium also includes payment for self cover, which pays for damage to the insured vehicle. This usually forms a larger portion of the cost and depends on the value of the car.

You can reduce your self-cover premium through a few simple choices. For example, if you install an anti-theft device in your car, your premium will reduce. Also, being a member of the Automobile Association of India can get you a discount of up to ₹200. The membership offers other benefits, such as facilitating the grant of an International Driver’s Licence. You can also save by buying your insurance online.

There are also other ways of reducing your premium. For example, a car that is parked under shelter may have a lower premium, says Dr Amarnath Ananthanarayanan, the CEO and MD at Bharti AXA General Insurance.

Some insurers like ICICI Lombard may also consider demographic details such as the profession and age of a driver when discounting a premium. Check if your insurer offers reduced rates for differently-abled persons or defence personnel.

Remember, your premium will automatically decrease as the car ages and depreciates.

Benefit from no-claims If you did not make any insurance claims in a year, the premium for the next year is usually reduced. For example, Bharti AXA offers a 20 per cent discount if no claims are made in the first year. In subsequent no-claim years, this discount will increase, up to a maximum of 65 per cent. So if your claim amount for any damage is low, calculate whether you want to foot the bill yourself and maintain the discount or make a claim.

That said, if after many years of no-claims and accumulating discounts you make a claim, the clock is reset. For example, say you didn’t make a claim for five years and your no-claim discount is 50 per cent. If you submit a claim in the sixth year, your premium discount goes back to zero and you have to start all over again. To avoid this, you can take a no-claim benefit protector option, which locks your no claim discount level in the year where there was a claim.

For instance, if in the third year you had a claim, instead of the 35 per cent dropping to zero, it will stay at 35 per cent. The cost of protection is 0.2 per cent of the insured value. The no-claims reduction is also transferable across insurers.

Lower premiums Another choice, if you feel claims are not likely, is opting to shoulder a larger share of claims payment. If your voluntary deduction is zero, then you will receive your entire claim amount. Your premium would be ₹16,607 for a car valued at ₹4 lakh, according to data from ICICI Lombard. By increasing the deduction amount to ₹2,500, the premium would reduce to ₹15,764. But the trade-off is that if there is a claim, you have to cough up ₹2,500, which would more than offset the saving So you may want to re-think if you are being penny-wise here.

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