Car insurance premiums are not fixed for everyone—they vary based on several important factors. Insurance companies look at details like the type of car you drive, how much it's worth, where you live, how you use the car, and your driving history. They also consider your age and the kind of coverage you choose. By looking at all this information, they try to estimate how likely you are to make a claim and then decide how much you should pay for your insurance.
Details required for calculating car insurance premium
To calculate your car insurance premium, whether for a new or old vehicle, you need to provide the following essential details:
- Car make, model, and variant
(e.g., Hyundai i20 Sportz 1.2L Petrol)
- Fuel type
(Petrol, Diesel, CNG, Electric)
- Manufacturing year
- Registration location
(City or RTO zone affects pricing)
- Vehicle ownership type
(Private or commercial)
- Insurance type
(Third-party or comprehensive car insurance)
- No Claim Bonus (NCB)
(If applicable, can reduce your premium)
- Add-on covers
(Zero depreciation, engine protection, etc.)
How to calculate insurance premium for new and old cars?
For a brand-new vehicle, the premium is calculated based on the Insured Declared Value or IDV, the present-day market value of the vehicle. The IDV decreases annually because of depreciation.
For new cars, the premium includes:
- Third-party premium (fixed by IRDAI)
- Own damage premium (depends on IDV, car model, among other things)
- Add-on covers (if selected)
For pre-owned or older cars, the IDV is significantly reduced due to age and depreciation. Premiums are calculated accordingly and may be lower than new cars.
However, factors like accident history, location, and usage patterns can still impact your premium. Renewals may also benefit from No Claim Bonus and loyalty discounts.
Use a car insurance calculator to get quick, accurate estimates for both new and used cars.
Factors that affect car insurance premiums
While buying car insurance, several factors should be taken into consideration, the premium being the first and most important. The premium for your car insurance depends on the following factors:
Insured Declared Value (IDV):
The IDV is the maximum amount or 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.
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.
Age of car:
Since, the IDV changes with the age of your car, age is also an important factor in car premium calculations. The older your car gets, the more depreciated it is, leading to a lower IDV and the lower the IDV, the lower the premium.
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.
Location of car:
The registration address of your car is also a determining factor in calculating 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.
Take your time to research and make an informed choice regarding the car insurance policy you will need. Once you have decided, you can calculate the premium for your chosen car insurance policy using an online car insurance calculator, before you actually take the plunge.
How to reduce car insurance premium?
Here are smart tips to bring down your premium without compromising on protection:
- Opt for voluntary deductibles: Agreeing to pay a portion of the claim can reduce your premium.
- Claim No Claim Bonus (NCB): Avoid minor claims and retain your NCB for up to 50% discount.
- Install anti-theft devices: ARAI-approved security features can lower premiums.
- Choose only essential add-ons: Avoid unnecessary covers that inflate your cost.
- Renew policy on time: Avoid policy lapse to prevent higher renewal rates.
- Compare and buy online: Use calculators on platforms to find the best rates.
Conclusion
Calculating your car insurance premium does not have to be a mystery. With the right information and digital tools, like online premium calculators, you can make informed choices tailored to your vehicle’s profile. Whether it’s a brand-new sedan or a trusty old hatchback, understanding how your premium is computed helps you save money while ensuring optimal protection through comprehensive car insurance. So, before your next renewal or purchase, take a moment to calculate, compare and choose wisely.
FAQs
1. What is IDV in car insurance?
IDV (Insured Declared Value) is the value of your four-wheeler in the market. It is the maximum amount your insurer will pay if your car is stolen or damaged beyond repair.
2. Does comprehensive car insurance cover everything?
No. While comprehensive car insurance covers own damage, third-party liability, theft and natural disasters, certain exclusions still apply, like wear and tear, driving under the influence, etc.
3. Will adding riders increase my premium?
Yes. Add-ons like zero depreciation, engine cover and roadside assistance add to the premium but offer enhanced coverage.
4. How often can I switch my insurer?
You can change insurers every year during renewal or even port your NCB to a new insurer.
5. Can I calculate my premium without registering the car?
Yes, using online car insurance calculators, you can estimate premiums based on make, model and location.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.