Factors That Impact Car Insurance Premiums

Your car insurance premium is not a fixed amount. It depends on several factors related to your car, the coverage you choose, and your claim history. Even two people driving the same car may pay different premiums. Understanding what factors impact your premium costs can help you make informed decisions while buying or renewing your car insurance policy.Read more

10 Important Factors That Influence Car Insurance Premiums in India

Car insurance companies consider these factors to determine your premium cost based on the level of risk associated with your car:

1. Type of Car

   The type of car you own is a significant factor that affects your insurance premium. SUVs, luxury cars, and sports cars are generally costlier to insure than hatchbacks or entry-level sedans. This is because they usually have a higher IDV and expensive spare parts & repairs.

2. Insured Declared Value (IDV)

   Insured Declared Value or IDV is the current market value of the car. It is the maximum amount an insurance company compensates the policyholder in case of a theft or total loss of the insured car. As the car ages, its IDV decreases, due to its depreciation in value. IDV and car insurance price co-relate directly. The higher the IDV of a car, the higher its policy premium.

3. Driving Record

   Your driving record also comes into play. If insurance companies know that you have a history of accidents or citations, they view you as a bigger risk. That brings about more expensive premiums. On the other hand, a good driving record results in lower premiums and can even get you discounts.

4. Car's Make, Model, & Engine Size

   Car insurance companies also consider your car's make, model, and engine capacity when calculating the premium. The availability & cost of spare parts, repair expenses, theft risk, and historical claim data for that particular model are all factored in.

5. Area of Vehicle Registration

   The location where your vehicle is registered also influences the premium cost. Urban cities and areas with a propensity to have a more congested traffic environment with a greater accident rate and crime rate tend to have a higher premium than smaller rural areas. This is owing to a heightened likelihood of claim in congested urban areas.

6. Type of Coverage

   The type of policy coverage you choose also influences the overall insurance premium of your car. A comprehensive plan that covers both own damages and third-party liabilities is more expensive than a basic third-party policy.

7. Add-on Covers

   Choosing add-ons in car insurance, such as zero depreciation cover, engine protection cover, 24x7 roadside assistance, or return-to-invoice cover, also impacts your overall insurance premium by increasing the cost of the own damage component. However, these optional covers also help you get wider financial protection.

8. Claim History & No Claim Bonus (NCB)

   A claim-free policy year earns you NCB in car insurance. It is a discount that helps reduce your own-damage premium at the time of renewal. Since making an own-damage claim may result in the loss of your accumulated NCB (unless secured by the NCB protect add-on), it increases your overall renewal premium.

9. Car Modifications

   Any modification that increases your car's value or repair cost, such as alloy wheels, performance upgrades or custom body kits, can lead to a higher premium cost. You should always inform your insurer about such car modifications to ensure they are covered under your policy.

10. Security Devices Installed

    Having a car fitted with anti-theft devices can even reduce your premium. Insurance companies also give discounts to cars with security devices such as alarms, immobilisers, and GPS tracking devices since these minimise the chances of a car being stolen.

Key Tips to Reduce Car Insurance Premium

Here are some useful tips you should follow to lower your car insurance premium:

• Leverage No Claim Bonus (NCB): Insurance companies offer NCB discounts on renewal premiums for not making any claim in the policy period. Hence, avoid raising claims for minor repairs so you can accumulate NCB discounts (up to 50%) on your policy premium.
• Increase Voluntary Deductibles: By declaring to pay more from your pocket in case of a claim, you can secure car insurance at a lower premium.
• Use Anti-Theft Devices: Install ARAI-approved anti-theft devices, such as locks or alarms, to get a discount on your own-damage premium.
• Choose the Correct IDV: Always choose the IDV close to the market value of your car. It will ensure that you are paying the right premium.
• Compare Policies Online: Compare multiple car insurance quotes online from different insurers on platforms like Policybazaar, so you can review the coverage, benefits, and add-ons offered before making the final choice.
• Timely Renewal: Renew your car insurance before its expiry to avoid coverage lapse and the loss of accumulated NCB.

In a Nutshell

Car insurance premiums can vary from one insurer to another. By comparing quotes and policy features, you can obtain the right coverage for your car at a competitive price. Want to know how much your policy may cost? Use our online car insurance premium calculator to get an instant estimate based on your car details and coverage preferences.