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Insurance Article

Car Insurance Premium

October 14 2015

Private Cars (Engine Capacity)

Third Party Liability Premium
(2014 - 15)

Not exceeding 1000 cc

Rs. 1,129

Exceeding 1000 cc but not exceeding 1500 cc

Rs. 1,332

Exceeding 1500 cc

Rs. 4,109

Age of Vehicle

% of Depreciation
(as per Indian Motor Tariff)

Up to 6 months

5

6 months to 1 year

15

1-2 years

20

2-3 years

30

3-4 years

40

4-5 years

50

All Types Of Vehicles

% Of Discount On Own Damage Premium

No claim made or pending during the preceding full year of insurance

20

No claim made or pending during the preceding 2 consecutive years of insurance

25

No claim made or pending during the preceding 3 consecutive years of insurance

35

No claim made or pending during the preceding 4 consecutive years of insurance

45

No claim made or pending during the preceding 5 consecutive years of insurance

50

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Make an informed decision

It is based on the sum insured and the extent of the insurance cover availed. This premium also depends on several factors. The insurance policy has to be renewed periodically to ensure the insurance cover stays active. Choosing a comprehensive motor insurance policy can increase your insurance premium however, it is essential to cover maximum financial losses arising out of unfortunate events.

When a new car is purchased, the showroom/dealer/manufacturer bundles the first insurance policy with the vehicle. However, subsequent policies (motor insurance renewals) can be done by visiting an insurance company's website and sharing the basic details like the make, model, registration details, etc.

 

History of Motor Insurance

Automobiles became a common sight on the roads after the First World War. During that period, cars were not as safe as today. They were fast and risky, dangerous for the driver, passenger as well as pedestrians. Motor insurance was non-existent till that period. It was first introduced under the Road Traffic Act 1930, United Kingdom.

Such a compulsory car insurance scheme ensured that drivers paid insurance premium to avail Third Party Liability insurance. Later on, several user-centric products and add-ons were introduced that combined to form a comprehensive motor insurance policy.

Indian Scenario

The Insurance Regulatory Development Authority of India (IRDAI) is the apex body that governs the functioning of the Indian insurance sector. Motor insurance falls under the General Insurance category and consists of several companies that offer comprehensive motor insurance products. In India, government-owned as well as private insurance companies offer user-friendly insurance schemes and world-class services. The claims procedure is also streamlined, transparent and hassle-free.

Insurance has gone digital and India is gearing up to this revolution. Insurance seekers can avail insurance related information at their fingertips and take an informed decision. A study conducted by Google and ICICI Lombard has also highlighted the importance of online insurance.

Higher Internet penetration has contributed in making insurance accessible to everyone through various web and mobile platforms. You can now easily renew your insurance policy at the click of a button. Online insurance has made it extremely convenient for people to avail and renew their insurance policies. There are specialized apps like the IL Insure App from ICICI Lombard that allow you to get a quote, locate a network garage or hospital, and even buy and renew insurance on the go!

Critical Aspects of Car Insurance Premium

Third Party Liability

Any damage to a person or property by your insured vehicle that results in financial loss or loss of life of such person is covered under Third Party Liability (TPL). It is mandatory to avail a TPL cover in India.

The motor insurance premium for this cover depends on the capacity of the vehicle. IRDAI issues a chart which states the TPL premium depending upon the engine capacity of the vehicle.

Own Damage Cover

While TPL covers damage caused to others, Own Damage as the name suggests is beneficial in case you meet an accident caused due to natural or man-made calamities.

The insurance premium for this type of cover depends upon the Insured Declared Value (IDV) which pertains to the market price of the vehicle after deducting depreciation based on the chart below.

Personal Accident Cover

A personal accident cover provides a fixed lump sum amount in case of an accident. This cover can be availed for the person driving the car and the passengers as well.

Zero Depreciation Cover

Availing this add-on makes you eligible to claim the entire amount for replacing damaged parts of your car. With this cover, you need not consider the depreciation value of the parts. Zero Depreciation cover is advisable if your car is less than three years old.

Road Side Assistance

This add-on provides assistance for emergency services like towing, flat tire change, battery jump-start, mechanic visit, fuel refill, key pickup and a lot more. Other add-ons like Engine Protect Plus, Garage Cash etc. are also available.

How to Calculate Motor Insurance Premium

Third Party Damage: Rate Fixed by IRDA (Premium A)

Own Damage Cover: Rate as per Tariff Calculate IDV (Insured Declared Value) (Premium B)

Personal Accident Cover: Rate depends on sum insured (Premium C)

  • Step 1: IDV x Premium Rate
  • Step 2: Plus cost of Add-ons
  • Step 3: Deduct NCB (No Claim Bonus) and other discounts
  • Premium A + Premium B + Premium C + Applicable taxes = Total premium

*IDV = Insured Declared Value = Ex showroom Price + Value of Car Accessories - Depreciation (as per a pre-determined depreciation table provided by IRDAI)

*NCB = No Claim Bonus = Bonus or discount awarded as appreciation of good driving skills if no insurance claim was made in the previous term of policy by the motor owner

*Add-ons = Additional covers like Zero Depreciation Cover, Garage Cash, Roadside Assistance etc. that help to make your motor insurance policy comprehensive

Other Factors determining car insurance premium

Car Type

The make, manufacturer, model and variant play an important role while determining the premium. There is a difference between insurance premium for high-end cars and budget cars. Sports Utility Vehicles will command a higher premium than a family car. The fuel type also matters. Final insurance premium will also depend on whether your vehicle runs on petrol, diesel or CNG.

Region [City where the vehicle was registered (RTO)]

Insurance premium varies depending upon the geographic region as well. The insurance premium is higher for a metro city as compared to a tier 2 city. The traffic density in metros is higher thereby increasing the level of risk, and hence the insurance premium.

Date of Registration

The manufacturing date of your car has a direct impact on your Insured Declared Value (IDV). As the car ages, its IDV reduces. Lower IDV results in lower premiums.

Anti-theft discount

Automobile Research Association of India (ARAI) approved anti-theft devices can help you to reduce your insurance premium. These devices can provide you with a 2.5% discount on your insurance premium.

Voluntary deductible

This is the amount you willingly decide to bear at the time of claims. This pre-decided deductible results in lower insurance premium.

No Claim Bonus (NCB)

NCB is a cumulative discount offered for a claim-free year. It is offered in accordance with the following table.

Review and Renew

Ensure to renew your policy before it expires. Apart from the legal aspect, meeting an accident when you car is uninsured, can result in severe financial losses. Many insurance companies provide reminders to their existing policyholders to inform them about their approaching insurance policy renewal date.

Renewing a policy also gives you an option to review your policy. You may have opted for a basic (third party only) cover early on but while renewing, you can go for a comprehensive cover. Similarly, if you feel that a specific add-on is applicable for you requirements, you opt for it while renewing. This might increase your insurance premium. However, ensure that you do not compromise on your insurance cover.

Beyond Car Insurance Premium

Premium rates are not the only criteria; they are one of the criteria while buying an insurance policy. While comparing policies, make sure that you consider, various features, benefits, claim settlement record, user reviews, and brand value of an insurance provider before purchasing a motor insurance policy.

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