Updated on - 5 May 2026
Understanding when car insurance decreases is crucial for budget-conscious individuals. Various factors influence the dynamics of insurance costs, and knowing when to anticipate a reduction can help vehicle owners plan their expenses more effectively. This blog will examine the factors that may decrease a car’s premium.
When Does Car Insurance Decrease?
Here are some ways in which car insurance goes down:
Age-Related Premium Reduction
As a vehicle ages, its insured declared value (IDV) decreases, reducing the car insurance premium.
IDV Calculation and Depreciation
Car insurance companies use a table based on the car's age to calculate its IDV, factoring in depreciation.
IDV Percentage by Age
Insurance companies often determine the Insured Declared Value (IDV) percentage based on the vehicle's age. This tiered approach ensures that the insurance coverage aligns with the vehicle's depreciating value over time. Here’s a table depicting the IDV depreciation slabs:
|
Vehicle Age
|
Depreciation (%)
|
Approx. IDV (% of Original Value)
|
|
Up to 6 months
|
5%
|
95%
|
|
6 months to 1 year
|
15%
|
85%
|
|
1 to 2 years
|
20%
|
80%
|
|
2 to 3 years
|
30%
|
70%
|
|
3 to 4 years
|
40%
|
60%
|
|
4 to 5 years
|
50%
|
50%
|
|
Above 5 years
|
—
|
Determined by mutual agreement with the insurer
|
Depreciation and Insured Declared Value (IDV)
Depreciation reflects the natural reduction in a vehicle’s market value over time due to age and usage.
No Claim Bonus
Insurers will award you a No Claim Bonus (NCB) if you don't file any claims throughout a policy year. At each renewal, it offers cumulative savings on the own-damage premium, which ranges from about 20% following the first year without a claim to 50% over the course of several years without a claim. This implies that keeping a claim-free record can result in far larger savings even if the car's age has a minor impact on lowering premiums. However, unless the policyholder has chosen NCB protection as an add-on, filing a claim resets the NCB to zero.
Apart from these, owners of the same car models with different manufacturing years pay different sums for car insurance due to variations in IDV.
Conclusion
The own-damage component of car insurance generally decreases with age, but the total premium may vary because of other factors. The IDV calculation, influenced by depreciation, is pivotal in determining the insurance cost. As a car ages, its monetary value decreases, leading to a corresponding reduction in insurance premiums. Understanding these dynamics helps vehicle owners make informed decisions, ensuring their insurance expenses align with the cars' changing value over time.
FAQs
1. Will choosing a higher deductible reduce the premium?
Choosing a higher voluntary deductible can reduce your premium, as you agree to pay a bigger share of the claim amount. But it’s important to choose a deductible that remains affordable in case of an accident.
2. How do I choose the best car insurance for lower premiums?
Comparing insurers, examining claim settlement percentages, and selecting only pertinent add-ons are all necessary steps in choosing the best possible auto insurance. While maintaining sufficient protection, avoiding unneeded covers might help keep the premium affordable.
3. Does comprehensive car insurance cost more than basic coverage?
Because it covers both third-party liability and vehicle damage, comprehensive car insurance typically has a higher cost than third-party insurance. It does, however, provide more comprehensive financial protection, which may prove advantageous over time.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure/policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.