Does the Value of Car Affect It's Insurance Premiums?

Everybody wishes to buy the best car in their budget. They desire to buy a car, which is the epitome of comfort, style, safety and durability, without breaking a bank. Some people also buy an expensive car to upgrade their current fleet. Purchasing a high valued car can reflect the improvement in your standard of living and can be a head-turner. When you buy an expensive or high valued car, you not only ensure greater luxuries but also increase your car insurance premium.

Read more


Compare & Save upto 85%* on Car Insurance
Processing
Get Car Insurance starting
@ only 2094/year#
  • Renew Policy In2 Minutes

  • 20+ Insurers To Choose From

  • 51 Lakh+ Vehicles Insured

#TP price for less than 1000 CC cars. All savings are provided by insurers as per IRDAI approved insurance plan. Standard T&C apply.

Car Insurance Premium Price

New India Assurance

Cashless Garages

253

Plan type

Comprehensive

Starting from

₹ 2,727

Check premium
Claim Advantage
  • Self-Video Claims
  • Reimbursement Within 7 Working Days For Non-Cashless

National Insurance

Cashless Garages

268

Plan type

Comprehensive

Starting from

₹ 2,757

Check premium
Claim Advantage
  • Self-Video Claims
  • Reimbursement Within 7 Working Days For Non-Cashless

Bajaj Allianz

Cashless Garages

1024

Plan type

Comprehensive

Starting from

₹ 2,868

Check premium
Claim Advantage
  • Spot Claims Upto Rs. 30,000
  • Repair service at select cashless garages

DIGIT

Cashless Garages

Repair Anywhere

Plan type

Comprehensive

Starting from

₹ 2,962

Check premium
Claim Advantage
  • 6-Month Repair Warranty
  • Advance claim payment
  • Free Pick-up & Drop

Oriental Insurance

Cashless Garages

258

Plan type

Comprehensive

Starting from

₹ 3,005

Check premium
Claim Advantage
  • Self-Video Claims
  • Reimbursement Within 7 Working Days For Non-Cashless

DIGIT

Cashless Garages

Repair Anywhere

Plan type

Third Party

Starting from

₹ 2,094

Check premium
Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person

Bajaj Allianz

Cashless Garages

1024

Plan type

Third Party

Starting from

₹ 2,094

Check premium
Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person

Oriental Insurance

Cashless Garages

258

Plan type

Third Party

Starting from

₹ 2,094

Check premium
Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person

National Insurance

Cashless Garages

268

Plan type

Third Party

Starting from

₹ 2,094

Check premium
Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person

New India Assurance

Cashless Garages

253

Plan type

Third Party

Starting from

₹ 2,094

Check premium
Claim Advantage
  • Covers damages to third party property
  • Covers damages to third party person
See more plans

Above-mentioned prices are for a 7-year-old Maruti WAGON R AVANCE LXI (998 CC) registered in Gurgaon and 15 days before expiry of previous policy

What is Car Insurance Premium?

If you own a car, you must be aware that the Motor Vehicles Act, 1988 mandates every car in India to be covered under a valid car insurance policy. In India, you can either buy a third party car insurance or comprehensive insurance for your car. Third party car insurance covers any third party liabilities arising out of your car due to causing injuries or property damages to third parties. Comprehensive car insurance provides broader coverage by covering your third party liabilities and damages sustained by your car in a fire, accident, manmade calamities, natural disasters or theft.

Although you have the freedom to buy the best car insurance as per your suitability, you must ensure that it includes third party insurance coverage. This is because a third party cover is necessary to abide by the motor laws of the country. You can compare car insurance from various motor insurers online to choose the best car insurance policy as per your budget and needs.

You cannot buy a car insurance policy without paying a premium. Car insurance premium refers to the amount that you pay to a motor insurance company to ensure financial protection against any loss or damages to your car. It is the cost of the insurance policy that you buy for your car. The premium for a car insurance policy is determined based on several factors. The value of the car is one of the biggest factors that determine the premium price of a car insurance policy. It affects how much you will pay for your car insurance policy.

How the Value of a Car Affects the Car Insurance Premium?

The value of a car directly impacts the premium of a car insurance policy. The higher is the value of your car, the higher will be the cost of your car insurance policy. This happens because of two reasons. First, high valued cars come with expensive car parts. If your car gets damaged, the cost of repairing or replacing the parts of a car will be higher than that of lower-priced cars. As a result, your motor insurer will have to shell out more money to repair your car. Therefore, insurers charge higher car insurance premiums for expensive cars as compared to affordable cars. For example, your insurer will have to pay more money to repair an SUV than a hatchback car as the former is more expensive.

Second, high valued or expensive cars catch everyone’s attention very easily. The likelihood of your high-end car attracting the attention of criminals or thieves and getting stolen is more than that of a simple and affordable car. Therefore, your insurer will have to pay more money to replace an expensive car than an affordable car. Since expensive cars are a greater liability for a motor insurer, they charge a higher premium for insurance of such cars.

The value of your car can also impact the type of car insurance that you can buy. Although the motor laws only mandate for a third party insurance cover for every car, some motor insurers may ask you to opt for a comprehensive car insurance policy if you have a high valued car. The insurer may not offer third party car insurance for expensive cars. This may happen because any loss or damages caused to the car is not covered under a third party car insurance policy.

How Does Motor Insurance Companies Determine the Value of a Car?

When you buy the best car insurance for your vehicle, the motor insurance company determines the value of your car to estimate the IDV. The IDV or Insured Declared Value refers to the maximum claim amount that the insurance company will pay to you in case you raise a car insurance claim. The IDV is calculated by subtracting the depreciating value of your car from the current value of the car.

The value of a car is determined by considering its current market value. Insurers do not consider the invoice value of a car as the value of a car keeps changing over time. To determine the current value of a car, the insurers consider the market value of a car and subtract depreciation from it to arrive at the IDV.

If your car gets completely destroyed in an accident and is beyond repairs, your insurer will write-off your car. As a consequence, your insurer will pay you the full IDV decided at the time of buying the car insurance policy. The higher the IDV of the car, the higher will be the claim amount that you will receive from your insurer. Thus, it is important to not settle for a lower IDV at the time of buying insurance for your car. You can compare car insurance plans online before policy purchase and buy a policy that offers you an IDV closest to the current market value of your car.

Besides, you can also buy zero depreciation add-on cover to ensure a higher IDV. The zero depreciation cover ensures that your motor insurer does not subtract the depreciating value of your car while estimating the IDV of your car. Since it is an add-on cover, you will have to pay a slightly higher car insurance premium to buy this cover. Moreover, this add-on cover is only available for cars that are not older than five years.

What Happens to Car Insurance Premium if You Upgrade to a Higher Valued Car?

If you upgrade your car to a high valued car, your car insurance premium will increase. The premium that you were paying until then was for the old car which was for a lower value than the new car. When you switch to an expensive car, the motor insurance company will charge you a premium based on the liabilities posed by the new car. Since high valued cars come with expensive car parts and pose a greater liability on the insurer, the motor insurance company will ask you to pay a higher premium in exchange for the car insurance coverage.

When you buy a new car, you can get the car insurance policy for your previous car transferred to your new car, provided you are no longer going to use the old car. You need to inform your insurer and submit the required documents to get your existing car insurance transferred to your new car. However, you will be required to pay the difference in the premium of the old car and the new car at the time of transfer.

Make sure to inform your motor insurance company as soon as you upgrade your car and get the car insurance policy transferred. If you fail to do so, you will not be able to raise a car insurance claim if your brand new car suffers from any damage. Even the best car insurance will not cover the damages of your new car if it has not been transferred from your old car to the new car.

Other Factors that Affect a Car Insurance Premium

Apart from the value of a car, there are several other factors that a motor insurance company considers to determine the premium for a car insurance policy. Take a look at some of the factors that affect car insurance premiums:

  • Age of the Car - The value of a car decreases as the vehicle gets older. As a result, the car insurance premium reduces as the age of a car increases.
  • Engine Capacity of the Car - A car with a higher engine cubic capacity may be more expensive to repair and may have expensive engine spare parts. Therefore, the premium of a car insurance policy is higher for a car with a higher engine cubic capacity.
  • Make & Model of the Car - The make and model of a car also impact car insurance premium. The premiums are higher for higher-end cars as such cars are more expensive.
  • Service Location of the Car - The geographic location where you use your car affects your car insurance premiums. You will have to pay a higher premium if your car is used at a place which is accident-prone or unsafe.
  • Type of Car Insurance Cover - Third party insurance provides lesser coverage than a comprehensive car insurance policy. Hence, you will have to pay a higher car insurance premium if you buy comprehensive insurance instead of the third party insurance policy.
  • Safety Features of the Car - Cars with safety features reduce the risk of the vehicle getting stolen. As a result, cars with more safety features will be offered lower car insurance premiums than cars without any safety devices installed.

In a Nutshell

Buying a high-end expensive car is no less than a dream for many people. But expensive cars also lead to higher car insurance premiums as the value of such cars is higher. Therefore, you must compare car insurance plans to find the best car insurance for your vehicle that is not only affordable amongst the available options but also offers sufficient IDV.

Written By: PolicyBazaar - Updated: 26 August 2021
You May Also Like
  • Transferring Car Insurance from One Person to Another

    Transferring Car Insurance from One Person to Another An integral part of selling a car, for both the buyer and the seller, is ensuring a successful car insurance transfer to the new owner. But sadly, most people have...

    read more
  • 9 Secrets That Your Motor Insurance Provider Won’t Tell You

    9 Secrets That Your Motor Insurance Provider Won’t Tell You Due to the dangerous driving conditions, it is compulsory to have third party insurance for every vehicle plying on Indian roads. It ensures the overall saf...

    read more
  • Money Saving Advice for All Car Owners

    Money Saving Advice for All Car Owners After a dream home, a dream car is your second-largest purchase that you make in your lifetime. But the expense does not cease when you drive off the car dealer's lot. Read mor...

    read more
  • Difference Between Comprehensive Insurance and Third Party Insurance

    Difference Between Comprehensive Insurance and Third Party Insurance Comprehensive insurance is insurance coverage that pays for the repair or replacement of vehicle damages resulting from an incident. Comprehensive ca...

    read more
  • Types of Motor Insurance

    Types of Motor Insurance The word Motor broadly covers a lot of classes of vehicles plying on the roads. These may be two-wheelers like scooters and motorbikes, three-wheelers or four wheelers like private cars, jeeps, ...

    read more

Find similar car insurance quotes by body type

Hatchback Sedan SUV MUV
insurance-ka-superhero
Search
Car insurance save up to 85
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Calculate your car IDV
IDV of your vehicle
Calculate IDV
Calculate Again

Note: This is your car’s recommended IDV as per IRDAI’s depreciation guidelines.asdfsad However, insurance companies allow you to modify this IDV within a certain range (this range varies from insurer to insurer). Higher the IDV, higher the premium you pay.

Policybazaar lets you compare premium prices from 20+ Insurers!
Compare Prices

Why buy from Policybazaar?

  • 24x7 Claims Assistance
    NEW
  • Cashless Assurance
  • 3-Day Repair Assurance
  • Free Pickup & Drop
  • Self Video Claims
  • Windshield Claims At Home
View Plans

Car insurance articles

Recent Articles
Popular Articles
Is Suspension Covered Under Car Insurance?

29 Jun 2022

A car's suspension helps to maximise the friction between the...
Read more
Know All About Vintage Car Registration Process

28 Jun 2022

No car can beat the beauty of a classic vintage car cruising on...
Read more
How to Save Your Car During Monsoon with Add-On Insurance Covers?

24 Jun 2022

Rains in India are mostly witnessed during the monsoon season. The...
Read more
Know About NCB Certificate in a Car Insurance

21 Jun 2022

With your car insurance policy, you get an additional benefit of a...
Read more
Know Everything About Endorsements in Car Insurance Policy

20 Jun 2022

When you buy a car insurance policy from an insurer, your policy...
Read more
Getting Your Duplicate Car Insurance Policy is Easy-Here’s How!
Losing important documents, such as your car insurance documents, can be daunting. In such a state of affairs, the...
Read more
Multiple Ways To Check Your Car Insurance Status Online
All insurance companies in India now have a digital presence. It not only makes it easier to buy insurance online...
Read more
Check Car Insurance Status Online on Parivahan Sewa/ RTO?
In India, buying car insurance is a compulsion for every car owner. It doesn’t matter if you are an excellent...
Read more
Transferring Car Insurance from One Person to Another
An integral part of selling a car, for both the buyer and the seller, is ensuring a successful car insurance...
Read more
Car Depreciation Calculator
If you are looking to purchase a new car or planning to sell your existing one, it is important to know how...
Read more