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How to calculate truck insurance premiums?

The third-party commercial vehicle insurance policy protects you against any financial liabilities incurred as a result of an accident.

Posted by Priya Singh on 10-Feb-2023 12:26 PM



The Insurance Regulatory and Development Authority of India established a formula for calculating commercial vehicle insurance premiums (IRDAI).

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What is Truck Insurance?

A truck insurance policy is a type of insurance policy which covers a truck from any damages such as accidents, collisions, natural disasters, fires, and thefts. Commercial vehicle also needs an insurance policy same as passenger vehicles. Commercial vehicles are valuable assets to any company because they are an essential part of the logistics team. This makes it critical to protect such valuable assets by purchasing a commercial vehicle insurance policy.

While accidents cannot be predicted, it is better to be financially prepared for them. There are two types of commercial vehicle insurance policies:

  1. A third-party commercial vehicle insurance policy
  2. A comprehensive commercial vehicle insurance policy

The third-party commercial vehicle insurance policy protects you against any financial liabilities incurred as a result of an accident to a third party. It does not cover any damages to your vehicle or yourself as a result of the incident.

The comprehensive commercial vehicle insurance policy covers a wide range of situations. It not only compensates you for the damages caused to a third party in an accident, but it also provides financial assistance to you and your vehicle.

How to calculate truck insurance premiums?

The Insurance Regulatory and Development Authority of India established a formula for calculating commercial vehicle insurance premiums (IRDAI). The formula used to calculate the premium is provided below to help you understand how it works.

Premium = Own Damage - (NCB + Discount) + Liability premium

*NCB- No Claim Bonus

Or you can also calculate simply by the given formula:

Commercial Truck Insurance Premium = Total Insurable Value x Insurance Rate

It is best to review the values of your assets at least once a year. This ensures that your policy limitations remain relevant as your company grows and changes.

How do I choose the best commercial vehicle insurance policy for my new vehicle?

Based on coverage and premium, you can compare commercial vehicle insurance plans from various insurers online. You can also use a commercial vehicle insurance premium calculator to compare the costs of various plans before purchasing one that best meets your needs.

You can calculate insurance online. Many websites have online insurance calculators. You can compare different insurance online and after that, you can make a call to the insurance agency.

Factors that affect the cost of commercial vehicle insurance

Consider the following factors that influence commercial vehicle insurance premiums:

• Vehicle Make and Model- The premium for high-end commercial vehicles is higher than for regular vehicles. This is because high-end vehicles have expensive parts, and thus their repairs are also expensive.

• Vehicle IDV - The IDV of the vehicle has a direct impact on your commercial vehicle insurance premium. The higher the vehicle's IDV, the higher the insurance premium.

• Vehicle Age - The age of the commercial vehicle influences the premium of your auto insurance policy. This is because older vehicles depreciate with age and thus have a lower IDV. The premium will be lower as the vehicle's age increases.

• Geographical Location - If the vehicle's operating location is prone to accidents or natural disasters, the insurance premium will be high. Ex - Taxis in Mumbai have to pay a higher premium because the city is prone to flooding and accidents.

• Fuel Type - The type of fuel used in your commercial vehicle affects your insurance premium as well. Because CNG vehicles are more difficult to maintain, they cost more than fuel vehicles.

• No Claim Bonus (NCB) - A No Claim Bonus (NCB) is a renewal discount that you receive for each claim-free year. As a result, the higher the NCB percentage, the lower the policy premium.

• Add-on Covers - Add-on covers are extra coverage options that you can purchase for an additional premium to supplement your policy coverage. The higher the premium amount, the more add-on covers you choose.

• Voluntary Deductibles - A voluntary deductible is the portion of the claim amount that you agree to pay during the claim settlement process. Insurance companies provide a discount in exchange for the deductible. As a result, the higher the voluntary deductible, the lower the premium.

What are the benefits of purchasing Commercial Truck Insurance?

If you own a business and you have at least one or more trucks. So, it will be part of your company's assets, it must be protected and covered so that you or your business do not suffer unanticipated losses in the event of an unforeseen and unfortunate situation.

Having truck insurance means that your company will be protected in the event of financial losses caused by your truck. This also means you'll avoid any potential downtime, keep a profit margin, and can instead invest in your company's growth.

It is required by law to have at least a Liability Only policy in place, which protects third parties against any damages and losses caused by your truck. However, given the risks that trucks can face, it's always better to have a standard package policy that protects both your truck and the owner-driver.

What isn't covered by the insurance?

It's also important to understand what your commercial truck insurance policy doesn't cover so there are no surprises when you file a claim. Here are some examples of such situations:

  1. Third-Party Policyholder's Damages

Damages to one's vehicle are not covered under a Third-Party Liability Only Policy.

  1. Riding while intoxicated or without a license

If the truck's owner-driver is intoxicated or driving without a valid license.

  1. Contributory Mistakes

Any damage caused by the owner-contributory driver's negligence (for example, driving in a flood)

  1. Consequential Losses

Any damage that is not directly caused by the accident (e.g. after an accident, if the damaged truck is being used incorrectly and the engine gets damaged, it will not be covered)

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