How Does Car Type Affect Car Insurance Premium?

When buying or renewing car insurance, many people wonder why two cars owned by people in the same city can have very different insurance premiums. The answer often lies in the type of car being insured. Your car type directly affects your insurance premium because it influences the insurer's risk and expected claim cost. In general, cars that are more expensive to repair or replace cost more to insure.Read more

Impact of Different Car Types on Insurance Premiums

The main way a car's make and model impact the car insurance price comes down to its market value. The higher a car's cost, the higher its insurance premium. Have a look at how each car category affects your premium cost:

1. Hatchbacks

   Hatchbacks are among the most affordable cars to insure, usually because they have:

   • Lower purchase price
   • Lower IDV
   • Affordable spare parts
   • Lower repair costs

   Since hatchbacks generally have a lower IDV than larger cars, insurers expect reduced claim amounts, leading to comparatively lower own-damage premiums.

   For example:

   Maruti Swift car insurance will usually cost less than that for a Mahindra XUV700 because of its significantly lower value and repair costs.

2. Sedans

   In terms of insurance premiums, sedans generally fall between hatchbacks and SUVs. While they offer more space & comfort, they also have a higher market value and slightly more expensive repairs than hatchbacks.

   For example:

   The insurance premium for a Honda City is generally higher than that of a Maruti Baleno but lower than that of a Toyota Fortuner.

3. SUVs and MUVs

   Sports Utility Vehicles (SUVs) and Multi-Utility Vehicles (MUVs) usually attract higher insurance premiums because they often have:

   • Higher purchase prices, thus a higher IDV
   • Larger & costlier body panels
   • More expensive spare parts
   • Advanced electronic features

   These factors increase the insurer's potential claim payout, resulting in a higher premium.

   For example:

   Repairing the front grille, bumper, and sensors of a Tata Safari or Mahindra 7X0 after a collision usually costs more than repairing a similarly aged hatchback.

4. Luxury or Sports Cars

   Luxury cars are among the most expensive ones to insure. They attract higher premiums because they often include:

   • Imported spare parts
   • Premium paint finishes
   • Advanced electronics
   • Expensive LED or laser lighting systems
   • Higher labour charges at authorised workshops

   Even a minor accident can lead to a costly claim.

   For example:

   Replacing the windshield of a luxury sedan like a Toyota Camry can cost several times more than replacing one on an economy hatchback. Hence, insurers charge a higher premium to cover this additional financial risk.

5. Electric Vehicles (EVs)

   Electric cars have unique insurance requirements. Although they have fewer moving parts than petrol or diesel cars, components such as:

   • The battery pack
   • Electric motor
   • Sensors
   • Charging equipment

   These parts are generally expensive to repair or replace. As a result, many insurers now offer electric car insurance plans that include coverage specific to these EV components.

   For example:

   If a Tata Harrier's EV battery gets damaged in an accident, replacing it can be one of the most expensive repairs on the vehicle. This increases the insurer's potential claim payout.

Does a Car's Engine Capacity Influence Insurance Premium?

Yes, the engine capacity (CC) of a car affects insurance costs, but only for third-party policies. For private cars, IRDAI fixes premiums for third-party insurance based on the engine capacity, and they remain the same across all insurers. Take a look:

• Less than 1000 cc cars have the lowest premiums: Rs. 2094
• Cars with the engine capacity of more than 1000 cc but less than 1500 cc: Rs. 3416
• More than 1500 cc cars have the highest premium: Rs. 7897

Does a Car's Fuel Type Affect Insurance Premium?

Yes, the fuel type of a car also impacts insurance costs. Here's how:

• Petrol: Cars with petrol engines are the most used passenger cars. Normally, their costs and repair expenses tend to be on the lower side.
• Diesel: In general, a diesel car is often priced higher compared to its petrol counterpart and may involve higher repair or maintenance costs. This can increase the insurance premium.
• CNG: Cars with approved CNG kits have higher premiums because the CNG kit also forms part of the insured car. .

Other Important Factors That Impact Car Insurance Premiums

Besides the type of the car, there are other key factors that influence car insurance premiums. Have a look:

1. Coverage Type

   Generally, car insurance is of two types: third-party insurance or comprehensive car insurance. While a third party policy is mandatory by law, comprehensive insurance also covers damages to your own car, which is why its premium is more than that of third party insurance.

2. IDV

   IDV in car insurance (Insured Declared Value) is the amount the insurer pays in case of a total loss of the insured car, which is when it is stolen or damaged beyond repair. You can set your car's IDV while buying or renewing car insurance. While a higher IDV implies a higher premium amount, choosing a lower IDV will keep the premium low but also decrease your claim amount in case of car theft or total loss.

3. Car Registration Location

   Four-wheeler vehicles that have their registration in metropolitan zones will have premium costs that exceed those registered in tier-2 or tier-3 areas. This is because metropolitan cities have heavy traffic conditions and, consequently, higher chances of accidents, resulting in elevated premium costs.

4. Driving History

   Insurance providers offer lower premium prices for safe driving because they assess individuals as less risky to insure. Thus, if you drive responsibly, your policy premium will likely be lower.

5. Add-on Covers

   When buying a comprehensive policy, you have an option of selecting car insurance add-ons to enhance your coverage by paying an additional premium amount.

Can You Reduce Your Insurance Premium Regardless of Car Type?

Irrespective of your car type, there are some ways to reduce your insurance costs without compromising essential coverage. Have a look:

• Compare quotes from multiple insurers before buying the policy
• Renew your policy before its expiry to avoid a break in your coverage
• Maintain a claim-free record to earn a No Claim Bonus (NCB)
• Install an ARAI-approved anti-theft device
• Choose only the add-ons you genuinely require
• Opt for a voluntary deductible if you're comfortable paying a higher amount from your pocket during claims

To Sum Up

The type of car you own is only one part of your insurance premium calculation. Other factors such as the IDV, engine capacity, repair costs, and theft risk, among others, also play an important role. Before buying or renewing your policy, it is advised to compare quotes online from different insurers and choose a plan that best matches both your car and your budget.