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Insurance Article

How to Calculate Your Car Insurance Premium?

January 15 2015
shutterstock_569376328

WHAT IS CAR INSURANCE?

Car insurance acts as a protective shield against theft, monetary losses due to accidents and any other subsequent liabilities. A comprehensive car insurance plan consists of three components - the mandatory third party cover, the own damage cover and personal accident cover.

But before we get to explaining those components in detail, it is important to understand what factors affect car insurance premiums.

5 Factors That Determine Car Insurance Premiums

The premium is the most important component of your insurance. The premium for your car insurance depends on the following factors:

  1. Insured Declared Value (IDV): The IDV is the maximum amount of sum assured that you can claim from your insurer, for a damaged or stolen car. Your IDV may vary depending on the ex-showroom price and depreciation of your car. So, the older your car gets the lower the IDV.
  2. Car Model: Your premium will vary based on how expensive your car is. More expensive cars with a higher engine capacity (exceeding 1500cc), like luxury sedans and SUVs, will have higher premiums, while base car models with lower engine capacity (below 1500cc) will have lower premiums.
  3. Age of Car: Since the IDV changes with the age of your car, age is also an important factor in determining car premium. As your car gets older, its IDV depreciates which leads to lower premiums.
  4. Car Safety: Another major factor affecting your car insurance premium is how safe your car is. Insurance premiums for cars with advanced safety features will be lower than those without such features. This is because safety features like airbags, ABS, collision warning systems, anti-theft alarms, and automatic braking make your car less susceptible to theft and accidents.
  5. Location of Car: The registration address of your car also determines your car insurance premium. Car insurance purchased at locations with higher crime and accident rates will have higher premiums as the car becomes more susceptible to theft or damage in such areas. This makes car insurance costlier in urban areas than rural ones, as crime and accident rates are usually higher in urban areas.
  6. Third-party, Own-Damage & Personal Accident Covers in a Car Insurance Premium

    Motor insurance plans shield you from monetary losses that may arise in case your car gets damaged due to some unforeseen event. You need to pay a small premium to the insurance company every year to claim this benefit if and when it arises.

    Your car insurance premium is the sum total of the following 3 covers:

    three-aspects-of-car-insurance-premium

    1.Third Party Cover

    Any damage to a person or property by your insured vehicle that results in financial loss or loss of life is covered under Third-Party Liability (TPL). In India, it is mandatory to have a TPL cover if you own a car. As TPL does not cover expenses borne by you for any repairs, it is always prudent to opt for a policy that extends its coverage to include losses on account of damage to your vehicle. The TPL premium rate is based on the car’s engine capacity. The table given below for TPL rates(Financial year 2019-20 ) is issued by the Insurance Regulatory Authority of India (IRDA):

    Annexure A - Motor Third Party Liability Insurance Premium for the Financial Year 2019-20 effective from 16th June 2019

    Table 1:

    S. No. Category Description of Vehicle Class Premium with effect from 16th June 2019 (Rs.)
    1.   Private Cars*  
        Not exceeding 1000 cc Rs. 2,072
        Exceeding 1000 cc but not exceeding 1500 cc Rs. 3,221
        Exceeding 1500 cc Rs. 7,890
           
    2.   Two Wheelers  
        Not exceeding 75 cc Rs. 482
        Exceeding 75 cc but not exceeding 150 cc Rs. 752
        Exceeding 150 cc but not exceeding 350 cc Rs. 1,193
        Exceeding 350 cc Rs. 2,323
           
    3. A1 Goods Carrying Vehicles Public Carriers (other than 3 wheelers)  
        GVW not exceeding 7500 kgs Rs. 15,476
        Exceeding 7500 kgs but not exceeding 12000 kgs Rs. 26,935
        Exceeding 12000 kgs but not exceeding 20000 kgs Rs. 33,418
        Exceeding 20000 kgs but not exceeding 40000 kgs Rs. 43,037
        Exceeding 40000 kgs Rs. 41,561
           
    4. A2 Goods Carrying Vehicles Private Carriers (other than 3 wheelers)  
        GVW not exceeding 7500 kgs Rs. 8,438
        Exceeding 7500 kgs but not exceeding 12000 kgs Rs. 17,204
        Exceeding 12000 kgs but not exceeding 20000 kgs Rs. 10,876
        Exceeding 20000 kgs but not exceeding 40000 kgs Rs. 17,476
        Exceeding 40000 kgs Rs. 24,825
           
    5. A3 Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles – Public Carriers  
        Except e-carts Rs. 4,092
        e-carts Rs. 2,859
           
    6. A4 Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles – Private Carriers  
        Except e-carts Rs. 3,914
        e-carts Rs. 3,204
           
    7. B Trailers  
        Agricultural Tractors up to 6 HP Rs. 857
        Other vehicles including Miscellaneous & Special Type of Vehicles (Class-C), (For each trailer, for more please multiply by no. of trailers) Rs. 2,341
        Except e-carts Rs. 3,914
        e-carts Rs. 3,204
           
    8. D Special Types of Vehicles  
        i) Pedestrian controlled Agricultural Tractors with Horse Power rating not exceeding 6HP, Hearses and Plane Loaders Rs. 1,550
        ii) Other Miscellaneous & Special types of vehicles Rs. 6,847
        e-carts Rs. 3,204
           
    9. E Motor Trade (Road Transit Risks)  
        i) Distance not exceeding 2400 kms Rs. 1,055
        ii) Distance exceeding 2400 kms Rs. 1,268
           
    10. F Motor Trade (Road Risks) (Excluding Motorized Two Wheelers) – (Named Driver or Trade Certificate)  
        1st named driver or certificate Rs. 1,345
        For additional drivers/ certificates up to 5 (per driver/certificate) Rs. 651
        For additional Drivers/ Certificates exceeding 5 but not exceeding 10 (per driver/ certificate) Rs. 419
        For additional Drivers/ Certificates exceeding 10 but not exceeding 15 (per driver/ certificate) Rs. 363
           
    11. F Motor Trade (Road Risks) (Motorized Two Wheelers) – (Named Driver or Trade Certificate)  
        1st named driver or certificate Rs. 515
        For each additional Driver/ Certificate Rs. 257

    *Vintage cars: 50% discount applicable for all private vehicles categorized under the 'Vintage Cars' segment. Certification by the Vintage & Classic Car Club of India is required for classification.

    Table 2

    S. No. Category Description of Vehicle Class
    Premium with effect from 16th June 2019 (Rs.)
    Basic TP Premium (A) Premium (per licensed passenger) (B)#
    12. C1a Four wheeled vehicles used for carrying passengers for hire or reward with carrying capacity not exceeding 6 passengers    
        Not exceeding 1000 cc Rs. 5,769 Rs. 1,110
        Exceeding 1000 cc but not exceeding 1500 cc Rs. 7,584 Rs. 934
        Exceeding 1500 cc Rs. 10,051 Rs. 1,067
           
    13. C1b Three wheeled vehicles used for carrying passengers for hire or reward with carrying capacity not exceeding 6 passengers    
        Except e-rickshaw cc Rs.2,595 Rs. 1,241
        e-rickshaw Rs. 1,685 Rs. 806
           
    14. C2 Four or more wheeled vehicles used for carrying passengers with carrying capacity exceeding 6 passengers for hire or reward    
        School buses$ Rs.13,874 Rs. 848
        Other buses Rs. 14,494 Rs. 846
           
    15. C3 Motorized three wheeled passenger vehicles used for carrying passengers for hire or reward with carrying capacity exceeding 6 passengers but not exceeding 17 passengers Rs. 6,913 Rs. 1,379
           
    16. C2 Three wheeled passenger vehicles used for carrying passengers for hire or reward with carrying capacity exceeding 17 passengers Rs. 15,845 Rs. 969
           
      C4 Motorized Two wheelers used for carrying passengers for hire or    
           
    17   reward    
        Not exceeding 75 cc Rs.861 Rs. 580
        Exceeding 75 cc but not exceeding 150 cc Rs.861 Rs. 580
        Exceeding 150 cc but not exceeding 350 cc Rs.861 Rs. 580
        Exceeding 350 cc Rs.2,254 Rs. 580

    # TP Premium is the total of Basic TP Premium (A) plus an amount derived by multiplying the Licensed carrying capacity by the amount in (B).

    $ School Buses are those buses which are registered in the name of the School and are used only for Transporting students to or from a school or on school related trips.

    Table 3 - Long Term Premium Rates

    S. No. Category Premium with Effect from June 16, 2019 (Rs.)
    18. New Private Car - 3 Year Single Premium  
      Not exceeding 1000 cc Rs. 5,826
      Exceeding 1000 cc but not exceeding 1500 cc Rs. 9,534
      Exceeding 1500 cc Rs. 24,305
    19. New Private Car - 3 Year Single Premium  
      Not exceeding 75 cc Rs. 1,045
      Exceeding 75 cc but not exceeding 150 cc Rs. 3,285
      Exceeding 150 cc but exceeding 350 cc Rs. 5,453
      Exceeding 1500 cc Rs. 13,034

    Table 4 - Rates for Electric Private Cars & Two Wheelers

    S. No. Category of Vehicle
    PPremium with effect from 16th June 2019 (Rs.)
    One Year Policies Long- Term Policies
    20. Private Cars    
      Not Exceeding 30 KW Rs. 1,761 Rs. 4,493
      Exceeding 30 KW but not exceeding 65 KW Rs. 2,738 Rs. 8,104
      Exceeding 65 KW Rs. 6,707 Rs. 20,659
    21. Two Wheelers    
      Not Exceeding 3 KW Rs. 410 Rs. 888
      Exceeding 3 KW but not exceeding 7 KW Rs. 639 Rs. 2,792
      Exceeding 7 KW but not exceeding 16 KW Rs. 1,014 Rs. 4,635
      Exceeding 16 KW Rs. 1,975 Rs. 11,079

    Table 5 - Rates for Quadricycle

    Category
    Premium with effect from 16thJune 2019 (Rs.)
    Basic TP Premium (A) PPremium (per licensed passenger) (B)#
    Quadricycle (Private Cars) Rs. 2,072 N/A
    Quadricycle (Commercial Vehicles not exceeding 500 CC) Rs. 2,595 RS. 1,241

    # TP Premium is the total of Basic TP Premium (A) plus an amount derived by multiplying the Licensed carrying capacity by the amount in (B)

    Own Damage Cover

    The Own Damage or OD cover is optional but highly beneficial. It provides reimbursements in case your car is damaged due to any natural events like earthquakes, fire, storms, etc. or due to any man-made calamities or any external accidents. The premium for an OD cover is calculated as a percentage of Insurance Declared Value or IDV (market price of your car less depreciation, as per the chart is given below).

    The thumb rule is that the more the IDV, the higher the premium and vice versa. Also remember that as your car grows older, the IDV decreases.

    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%

    Procedure for Calculating Own Damage Premium

    own-damage-premium

    Doing detailed calculations can help customers manage their premiums effectively and on time. Below are the key steps in calculating your OD premiums:

    1. Calculate IDV- IDV is the insured declared value which the consumer receives in case of theft or total loss of the vehicle. IDV is calculated on the basis of the selling price and the deductions due to the depreciation of the vehicle’s parts. One can find this by the below formula
    2. Insured Declared Value = (Company’s listed price – the depreciation value) + (Cost of vehicle accessories - the depreciation value of these parts)

    3. Multiply IDV by premium rates- This is the rate at which the premium is payable and depends on geographical locations, cubic capacity (capacity of the vehicle engine), and age of the vehicle. The premium rates are comparatively higher for Tier I cities than Tier II and Tier III cities.
    4. Adding bonus add ons- It is advisable for customers to check for any add-ons that they can avail on their premiums. Some of the primary add-ons are:
      • Zero depreciation or Bumper-to-Bumper cover
      • Engine protect cover
      • Consumables cover
      • Return to invoice cover
      • NCB protect cover
    5. Deduct any discounts- Check for NCB (No-Claim bonus) which is available if no claims are made in the previous year. NCB can get accumulated over the years and go up to 50%. In addition to NCB, there are some prescribed discounts are also available on Own Damage premium that includes Installation of anti-theft devices, membership of Automobile Association of India, opting for voluntary deductible/excess, etc.

    Personal Accident Cover

    PP accident cover

    The last component of your car insurance premium is the Personal Accident Cover. This cover safeguards your finances in the unfortunate event a fatal accident occurs that renders you permanently or partially disabled. A compulsory personal accident cover is provided to the owner-driver.

    However, one may increase the sum insured and also include unnamed passengers in the policy. The higher the sum insured, the higher the personal accident premium to be paid.

    You can make this process simpler by using an online car insurance premium calculator. All you need to do is fill out your details in an online calculator; these are available on the websites of all leading insurance providers like ICICI Lombard.

    Many buyers do not take into account the details of the insurance premium at every renewal and head straight for making a payment. Take your time to research and make an informed choice regarding the car insurance policy you need.

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