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A majority of car owners in Kenya do not have an idea of how insurance costs are calculated. This is a topic that many motorists are ignorant and this has opened an avenue for exploitation by some insurance brokers! 

With a wide array of insurance options offered by many insurance companies, there is a huge likelihood that few motor vehicle owners know how insurance companies arrive at the insurance costs. In this article, we will analyze the cost factors that affect the premiums offered in insurance and determine whether the least expensive choice offers sufficient protection.

This type of insurance is the most recommended and the best to have on a car because it offers a wide array of coverage e.g. protection from theft, fire, damage, and even injury to either party.

Motor Vehicle Comprehensive policy only protects damage or loss to the motor vehicle and any claim made by the third parties. As such the policy does not pay any claim for loss or damage made by the policyholder.

This type of insurance only benefits the person who has been injured or whose car has been damaged by the insured car. The owner doesn’t benefit from this type of insurance and any damage or injury to him and the vehicle is his financial responsibility.

This type of insurance only covers specific damages done to the third person i.e. fire and theft and does not cover the insured car for losses incurred. This insurance is preferred by cars in transit.

This type of insurance is only payable when the occupants of a car involved in an accident have been involved in an accident that has resulted in bodily harm or death, especially the driver.”

Older cars may have higher premiums due to the increased likelihood of mechanical failure or being more susceptible to theft. New vehicles in good condition tend to attract higher insurance premiums. cost of car insurance is hugely dependent on factors such as;

• More expensive, powerful cars typically cost more to insure due to the higher potential repair costs in case of an accident.

• Cars with good safety ratings might receive discounts.

• Younger drivers with less experience are statistically more likely to be involved in accidents, leading to higher premiums.

• As drivers gain experience (typically over 25 years old), their premiums tend to decrease.

• Areas with higher accident rates or theft statistics will generally have higher insurance costs.

• Safer areas with lower crime rates may qualify for lower premiums.

The primary use of the vehicle, such as personal use or commercial use, can affect premiums. Vehicles that are used for commercial purposes have higher insurance costs since they are involved in many tasks thus a greater risk.

Comprehensive coverage, which includes protection against theft and damage caused by other events (fire, hail, etc.), is more expensive than third-party liability (minimum legal requirement).

Choosing a higher deductible (the amount you pay upfront before insurance kicks in) can decrease your premium, but requires you to shoulder more financial responsibility in case of a claim.

• A clean driving record with no accidents or traffic violations typically leads to lower premiums.

• A history of accidents or violations will increase insurance costs.

Finding the right balance between affordability and protection is key. Here’s how to potentially adjust coverage.

The cheapest option isn’t always the best. Aim for the “best value”. Find coverage that provides enough protection at a fair cost.

The cheapest option might not be the cheapest as it varies from person to person depending on a person’s financial ability. For some comprehensive insurance might be the cheapest option but to others, it is the most expensive option therefore the question of the cheapest is subjective and is hugely based on individual attributes.

When deciding the best insurance coverage, opting for the cheapest option might come with huge implications should damage or injury occur and therefore it is important to choose insurance based on what the package contains rather than the cost. It is advisable to carefully select an insurance cover that suits your car to avoid a situation of limited coverage in the name of the “cheapest option.”

Cheap insurance could force you to dig deep in your pockets to cover the financial liability leading to financial strains incurred as high deductibles.

Comparing quotations from various insurance companies helps one make an informed decision on what insurance is the best for their vehicle. Understanding various factors such as; cost savings given by each company, policy and terms, and even their customer satisfaction and reputation play a huge part in the selection process. These costs are available on company websites and also the Insurance Regulatory Agency which is the body in charge of regulating the premiums.

Just to give a glimpse of how insurance costs are calculated we will use Real-life scenarios for example; a company that charges 4% per annum on the value of a car for comprehensive insurance will charge an insurance premium of 160,00 shillings per annum for a car of estimated value 4,000,000 shillings. Comprehensive insurance being the best insurance coverage has a higher percentage compared to other types of insurance coverage. Depreciation factors also help subsidize the amount over time.

Knowing how much to pay for your car insurance is as vital as its ownership. Understanding when to get value for your money and not be exploited is important. Do not underpay or overpay for your insurance while you can just understand the basics of insurance premiums.