Why New Car Insurance is so Expensive in India?

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One of the most critical factors affecting the car insurance price is whether the car is old or newly purchased. If your car is newly bought, then its insurance premium will be more than an old car. Let us understand the reason behind new car insurance being expensive further in the article.

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      Reasons Behind Higher Car Insurance Prices for a New Car

      Are you wondering why the insurance price of the new car you purchased is more costly than your old car? The reason behind this can be many. From your car’s make, model, age, and IDV to security features, all of this constitutes the price of your car insurance. Below we have mentioned some important reasons why your new car insurance is so expensive. Take a look:

      1. Higher IDV means Higher Premium

        IDV or the Insured Declared Value of a car refers to the compensation that you receive in case your car suffers a total loss. This amount is directly proportional to your car's premium. If your increase the IDV of the car, its premium also increases and vice versa.

        IDV is ascertained by taking into consideration the ex-showroom price, variant of the vehicle and depreciation at the start of the policy. Due to higher cost, and lesser depreciation at the beginning, a new car attracts a higher IDV thus resulting in a higher car insurance premium.

      2. Costly Repairs

        The newer the car is, the more will be its repair expenses in case it suffers any damage due to an accident. Moreover, a luxurious car, for instance, a Honda City will be more expensive to repair than a budget car such as a Wagon R. Car insurance companies, consider this factor while estimating the insurance premium of a four-wheeler.

        Since new cars are costly to repair, it increases the financial liability of an insurer, thus leading to a higher motor insurance premium.

      3. Age of the Car

        The age of the car is also an important factor that makes new car insurance a costly affair. The older the car is, the less will be its insurance premium. One of the major reasons behind this is the depreciation of the car. As a car ages, it starts to depreciate more, which in turn reduces the IDV of the car, thus leading to low car insurance premiums and vice versa.

        For instance, for a newly bought car, the depreciation would be roughly 5% making the IDV of 95% of the ex-showroom price and thus the premium of such a car would be high. As soon as the car gets more than 6 months old, its depreciation will increase by 15% thus reducing the IDV to 85%. This reduction in IDV will reduce the premium cost as well.

      4. Higher Risk of Theft

        A brand new car will also be at a higher risk of theft as compared to an old car thus resulting in a high premium amount. Increased chances of theft will also increase the liability of the insurer at the time of claim settlement.

        Thus, the insurance company increases the premium of a new car insurance policy.

      How to Calculate New Car Insurance Premium?

      After the introduction of the online car insurance premium calculator, calculating the premium of a new car is not cumbersome anymore. Simply enter your new car details in the car insurance calculator and submit.

      The online car insurance calculator will calculate the premium for your new car based on its model, variant, registration year and other details. Along with calculating car insurance prices, you can also compare car insurance plans from multiple insurers on Policybazaar.com and choose the one that suits your needs.

      How to Reduce New Car Insurance Premiums?

      Here are some tips that you can adopt to lower the premium of your new car insurance policy:

      • You can also choose to not buy car insurance from the dealer. Make sure to compare car insurance prices online before purchasing a plan.
      • Install an ARAI-approved anti-theft device in your device to reduce your car's premium
      • Make sure to take advantage of company-offered discounts if any
      • Set your IDV wisely, so that is at par with your car’s market value. Increasing your IDV way too much will only increase your premium
      • Choose add-on covers wisely. Only choose the covers that you need for your car to avoid paying a higher motor insurance premium.

      Wrapping Up!

      Due to a higher IDV and costly repairs, the premium of a new car insurance policy gets expensive in India. However, by following the above-mentioned tips and choosing car insurance online, you can save up on the premium of your newly bought car.

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