Car insurance is a must-have for every vehicle owner in India, not just for legal reasons but also to protect yourself from the high costs of accidents and damages. However, when it comes to the cost of insurance premiums, many factors come into play. Understanding what affects your car insurance premium can help you make informed decisions, get better coverage, and potentially save money.
In this blog, we’ll explore the top factors that influence car insurance premiums in India.
1. Type of Car Insurance (Comprehensive vs. Third-Party)
The type of car insurance policy you choose is one of the primary factors influencing your premium.
- Third-Party Insurance: This is the minimum required by law in India. It covers only third-party liabilities, such as damages caused to other vehicles, property, or injuries. It’s the cheapest option available but offers limited coverage.
- Comprehensive Insurance: A more expensive option that covers both third-party liabilities and damages to your own car. It offers broader protection and is the preferred choice for many car owners. Because it covers more risks, the premium is higher.
Takeaway: Comprehensive plans usually have higher premiums due to the additional coverage they provide.
2. Car’s Make, Model, and Age
The make and model of your car play a significant role in determining the premium.
- Make and Model: Luxury cars, sports cars, or high-end vehicles often attract higher premiums due to their high repair costs and the risk of theft. On the other hand, budget-friendly or standard cars may have lower premiums.
- Age of the Car: Older cars generally have lower premiums because their market value depreciates over time, which reduces the potential payout for the insurer. However, this can also affect the extent of coverage, as some older cars may not be eligible for a comprehensive policy.
Takeaway: The more expensive and newer the car, the higher your premium will be.
3. Insured Declared Value (IDV)
IDV is the maximum amount that your insurer will pay in case of a total loss or theft of your car. It is essentially the market value of the car at the time the policy is issued.
- Higher IDV: If you set a higher IDV, your premium will be higher, as it increases the potential payout for the insurer.
- Lower IDV: Conversely, setting a lower IDV can reduce your premium, but this also means you’ll receive a lower amount in case of a total loss.
Takeaway: Be sure to choose an IDV that balances your car’s market value and your budget, as it significantly impacts the premium.
4. Driving History and No-Claim Bonus (NCB)
Your driving history can impact your insurance premium. If you have a clean driving record with no history of accidents or claims, you might be eligible for a No-Claim Bonus (NCB). This is a discount offered by insurers for every claim-free year, which can lead to significant savings on your premium.
- Clean Driving Record: A claim-free history signals that you’re a low-risk driver, leading to lower premiums.
- Frequent Claims: On the other hand, making frequent claims can increase your premiums due to the perceived higher risk.
Takeaway: Maintaining a claim-free record not only ensures your safety but also helps you save on premiums.
5. Location and Area of Residence
Where you live also influences your car insurance premium. Areas with higher traffic, a higher crime rate, or a greater chance of natural disasters may result in higher premiums.
- Urban vs. Rural Areas: Cities like Mumbai, Delhi, or Bangalore, with dense traffic and a higher risk of accidents or theft, often have higher premiums compared to rural areas.
- Theft-Prone Areas: If you live in an area with a high rate of car theft, the insurer may charge a higher premium to cover that risk.
Takeaway: The safer and less congested your area, the lower your insurance premiums are likely to be.
6. Add-Ons and Riders
Add-ons or riders are extra benefits that you can add to your policy for an additional cost. Some common add-ons include:
- Zero Depreciation Cover: This ensures that depreciation doesn’t affect the claim amount, meaning you can get the full cost of repairs or replacement.
- Engine and Gearbox Protection: This covers damages to the engine and gearbox, which aren’t usually covered under a basic policy.
- Roadside Assistance: Provides assistance in case your car breaks down or faces a problem on the road.
Takeaway: While add-ons increase the premium, they offer additional protection and can save you money on repairs in the long term.
7. Voluntary Deductible
A voluntary deductible is the amount you choose to pay out of your pocket in the event of a claim. The higher the voluntary deductible you choose, the lower your premium will be.
- Higher Deductible: If you’re willing to pay a higher amount out of your pocket during claims, your insurer may reduce your premium.
- Lower Deductible: A lower deductible means the insurer will bear more of the cost, but your premium will be higher.
Takeaway: Carefully assess your ability to pay in case of an emergency before opting for a higher deductible to save on premiums.
8. Age and Gender of the Policyholder
In India, the age and gender of the car owner can also affect the premium, though this is less common with most modern insurers adopting a more gender-neutral approach.
- Age: Young drivers (under 25) often face higher premiums due to their lack of driving experience and higher risk of accidents.
- Gender: Some insurers used to charge higher premiums for young male drivers due to the statistically higher risk associated with them, though this is becoming less common.
Takeaway: While age and gender may influence premiums slightly, the biggest impact comes from your driving behavior and car-related factors.
9. Type of Fuel and Engine Capacity
The type of fuel and engine capacity in your car can also impact your premiums.
- Petrol vs. Diesel: Diesel cars typically have higher premiums due to the higher repair costs and the risk of engine damage. However, the difference in premiums has reduced over the years as diesel vehicles have become more common.
- Engine Capacity: Cars with larger engines (more than 1500cc) are considered more expensive to repair and, as such, attract higher premiums.
Takeaway: Diesel cars and those with larger engine capacities tend to have higher premiums.
10. Vehicle Modifications
If you’ve modified your vehicle, it could result in higher premiums. Certain modifications, such as adding sports rims, spoilers, or performance enhancements, may increase the car’s value or repair cost, leading to a higher premium.
- Cosmetic Modifications: Modifications that enhance the look of the car may increase its market value, thus raising the premium.
- Performance Modifications: Modifications that affect the car’s performance, such as tuning the engine or adding a turbocharger, can increase the risk and raise premiums.
Takeaway: If you’ve modified your car, inform your insurer to adjust the policy accordingly.
Conclusion
Several factors contribute to determining the car insurance premium in India, including the type of coverage, your car’s make and age, location, and your driving history. By understanding these factors and making informed decisions, you can get the best coverage at an affordable price.
To save on premiums, consider maintaining a claim-free record, opting for a higher voluntary deductible, and choosing the right add-ons for your needs. Always compare policies from different insurers to find the one that best suits your requirements.
