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Insurance Article

How to Calculate Your Car Insurance Premium?

January 15 2015

 Do you skip the fine print (mostly made up of numbers and percentages) at each renewal and head straight for making a payment? Well, then this time be different. Read ahead as we break down the premium components and simplify the calculation.

For Novice Car Owners

Motor insurance plans shield you from monetary losses that may arise in case you meet with accidents while driving your car or 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/when it arises.

Three Aspects of Car Insurance Premium

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


Third Party Cover

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). 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 own vehicle.

The TPL premium rate depends on the basis of car capacity. The table given below for TPL rates is issued by the Insurance Regulatory Authority of India (IRDA):

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

Own Damage (OD) Cover

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

The thumb rule is - more the IDV, higher the premium and vice versa. Needless to mention, 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


Personal Accident Cover

personal-accident-coverThe last component of your car insurance premium is the Personal Accident Cover. This cover safeguards your finances in the unfortunate event of meeting with a fatal accident or one that renders you permanently 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. Higher the sum insured, higher is the personal accident premium.

That was simple, wasn’t it? You can make it simpler by calculating your estimated car insurance premium online. 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.

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