Factors Affecting the Premium of Commercial Vehicle Insurance

Vehicles running on Indian roads and used for commercial purposes work a lot differently than personal vehicles. Commercial vehicles plying in India have to bear extreme weather and depleted road conditions every now and then. Furthermore, these commercial vehicles are mostly loaded. All these factors cause high strain on commercial vehicles and often cause early depreciation. Thus, apart from meeting the mandatory legal requirement, suitable commercial vehicle insurance is necessary to keep these vehicles financially protected against adverse circumstances and high-risk exposure.

Not to mention that the premium values of these commercial vehicle insurances get affected and defined by a range of factors, including the risk mentioned above. Thus, it is important to know in detail the factors that affect the premium of commercial vehicle insurance. It should help make an informed decision related to a suitable policy selection.

Factors That Affect Commercial Vehicle Insurance Premiums

The following are the most important factors that help determine the cost of a commercial vehicle insurance premium.

Type of vehicle: The type of vehicle being insured impacts the premium value of its policy as the vehicle value varies with its type. For instance, insurance for a truck is going to cost more than a smaller vehicle used for transportation. This is due to the higher market value of the former.

Frequency of commercial usage: Commercial vehicles can be used either as subservient to the primary business or be a part of the primary business. For instance, a commercial vehicle can either be used for the occasional transportation of business employees or be employed for the everyday transportation of passengers depending on the type of business that owns it. Hence, a business in which the frequency of commercial usage of the vehicle is higher than

Type of load: The premium of a commercial vehicle insurance policy can also be affected by the type of load it carries. Commercial vehicles can either carry passengers or goods, whereby the latter can further be bifurcated into goods that may or may not risk damage to the vehicle. Usually, a vehicle whose load carries a higher risk of damage attracts a high premium cost.

Age of the vehicle: For any vehicle, its years of use and the total age impact the premium cost. It is because the age of the vehicle determines two essential and interrelated aspects that have a bearing on the insurance premium - the IDV (Insured Declared Value) and depreciation. A higher depreciation means a low IDV and vice versa. Thus, the older your commercial vehicle, the higher will be the premium because of high depreciation, low IDV and an increased risk of damage in case of road incidents.

Driver of the vehicle: In the case of commercial vehicle insurance purchase, the driver of the vehicle can have a bearing on the premium cost of the policy as well. Each driver has a license number, which can be checked for previous history of accidents and claims made. Thus, commercial vehicles whose drivers have had a history of multiple accidents and insurance claims will attract policies with higher premiums and vice versa.

Apart from these above-mentioned aspects, there are some other common factors that impact the insurance premium of any vehicle, including commercial vehicles. They include the location of vehicle use, its road conditions, whether it is an accident-prone area, the vehicle’s engine type, safety fittings and the type of cover selected, etc. Note that a commercial vehicle is also subjected to the mandatory third-party liability coverage under the Motor Vehicles Act, 1988, which makes the need to have at least a third-party liability cover compulsory.

Keeping all these factors in mind allows you to better assess the premium of your commercial vehicle insurance policy. Note that when making the purchase of your commercial vehicle insurance online, you are more likely to get better offers than offline. Such offers can ultimately reduce the cost of your policy premium.