Calculate Car Insurance Premium

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How to Calculate Car Insurance Premium in India

In simple words, the insurance premium is an amount of money you pay periodically to the insurance company against the contract of the policy. Now, you must be thinking “what is the contract? And why do you pay?”, Right? So generally, according to the agreement in a car insurance policy, the insurer guarantees to take care of your bills incurred from any repair done to your car, only if you have successfully paid the decided premium in the decided time interval. Keep in mind that the terms of the coverage will be mentioned in the policy contract.

If you own a car, there are always chances that you take the car to the garage. No doubt, the garage will hand over a heavy bill at the end of the process, so the insurance company will clear that bill as a return favour to your timely premium payment. And the amount of the premium depends on numerous factors.

 

Read more: Car Insurance Premium Calculator - Get Premium in 20 seconds

What are the factors that affect the Car Insurance Premium?

A car insurance premium is affected by different factors like:

The Car itself

The insurance premium for some cars are more than others. The engine cubic capacity of your car decides the premium of the third party cover. Higher the cc of your car higher will be the premium of TPI. The make model details are considered if you are choosing other packages and add-ons.

Where you live

The location in which your car is registered plays an important role in the premium of your car insurance. If you live in a highly populated urban area or in a city then the premium will be higher. Because the chances of claims are higher due to heavy traffic, congestion, vandalism and other factors.

Age of the Vehicle

For a new vehicle, you would look for a greater extent of coverage. It is because if the new car gets damaged, the cost of repairs will be high. Instead, for an old vehicle, the cost of replacement of the parts and repairs can be affordable for you. Hence, the age of the vehicle governs the car insurance premium.

Fuel Type

Owning a CNG car will attract more CNG car insurance premium because the cost of maintenance is higher in comparison to that of petrol or diesel car. The damage repair costs are higher for the CNG kit installed car. Hence the premium is more.

Driving Efficiency

If you are a bad driver and has higher records of accidents, probability of own damage is more. Also, you won’t get No claim bonus discount, hence you will end up paying a higher premium.

Insured’s Declared Value

The IDV of the car is the amount for which you seek assurance of payment through an insurance policy at the time of claim. The value of IDV is further governed by depreciation. For higher IDV, the premium will be higher and vice-versa.

Deductibles

The percentage of claim amount that you will have to pay from your pocket at the time of claim is referred as a deductible. Other than the standard deductible applied under the car insurance, you can request the insurer to increase the deductible. For higher deductibles, the premium charged from you will be lower and vice versa.

Coverage Type

The Third-Party premium is decided by the Government of India and it is a mandatory cover. But if you take Comprehensive cover then the premium may vary from insurer to insurer depending on discount and rates they offer. If you buy car insurance add-ons along with the Comprehensive Cover, then the premium will increase accordingly.

Driver/Owner Age

Most of the insurers in India do not consider age to compute the premium as of now. But in future, they may keep the factor in mind because the younger drivers have a higher probability of causing an accident.

Components of a Car Insurance Premium

The car insurance premium is the amount of money you will pay the insurer in place of buying a policy from them. A Car Insurance premium is computed based on different factors that affect it directly. It is also based on the types of cover you would want to choose. So, you may understand that car insurance will have premium charged for:

Own Damage Premium

It is the share of the premium you pay to get the coverage for your car against damages. These damages may arise from natural calamities, collision, and theft or vandalism. Each insurer will have its rate for Own Damage premium computation. Further, according to their product loss ratio, they offer discounts. The premium under this type of insurance will vary from insurer to insurer.

Riders/Add-Ons

These may be extra covers when you seek to widen the limits of cover under the car insurance policy. Depending upon the types of add-on covers, the premium will increase. Some of the add-ons you can choose from including Engine and Gearbox Protection, Zero Depreciation, Consumable Cover, PA cover for passengers, and others.

Compulsory Personal Accident Cover

Lately, considering the rise in the cases of injury to car owners/drivers, the Government has made a Personal Accident cover mandatory. The minimum Sum Insured decided for the risk cover is Rs.15 lakhs. You can further request to enhance the cover in multiples of 1 lakh or 5 lakhs.

Third-Party Liability Premium

Third-Party Liability insurance has been made mandatory by the government in India. The TP premium for your car will be computed after evaluating the cubic capacity of the engine.

Others

Other than these, the percentage of discount offered along with the No Claim Bonus earned by you will also impact the car insurance premium.

Example of Car Insurance Premium calculation

Let us see how Digit Insurance will calculate the premium for the car you purchased today. Think you bought a New Maruti Alto 1.1 LXI Petrol version with airbags for Rs.276675/- .

Sum Insured/IDV

₹276675

Own Damage Premium

₹6261

Third Party Premium

₹5286

Zero Dep Cover (add-on)

₹1338

Engine Protection and Gearbox Protection (add-on)

₹176

Consumable Cover (add-on)

₹88

Personal Accident Cover

₹330

Additional Discount on OD Premium

₹1445

Net premium

₹12034

GST@18%

₹2165

Gross Premium

₹14,199

A Car Insurance Policy is your need to prevent undue financial liabilities that may shake your savings. Getting a renewal of the policy is as important as buying a car policy for a new vehicle.