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  • How Car Insurance Premiums are Calculated in India?

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    It is an ecstatic feeling which one cannot express in words when the dealer finally gives the keys of the new car. Owning a car is a sense of achievement, especially for a middle class person. It is your hard earned money and it is a natural feeling that you would like to protect it from all the damages that may possibly happen to the car. Considering the size of a car, there is no doubt that it is mandatory to insure the vehicle that provides a complete coverage to the vehicle.

    Travelling by car is convenient and comfortable, but it is also true that it is a risky gamble of life where you may get injured, or any third-party may be hurt or your own car ay get damaged. Few people opt only for third-party liability coverage which is insufficient and does not meet the required protection for the vehicle. If you are opting for an insurance cover because it is cheap, please note that you are not saving money with this option, rather you will end-up spending more in the future for repairs and claims for the insurance. So how can you get a good insurance policy which has a premium that is affordable to you and fulfills all the requirement?

    There are two plans of car insurance and you can opt for either of them; (i) Third-party liability only cover, which provides protection to the third-party person or property who is hit by the insured vehicle. This is a minimum and mandatory cover that every vehicle should be insured with as per the IRDAI regulations.(ii) The second type is a Comprehensive plan which provides complete protection to the car against own damage, third-party liability, accident, natural calamities, perils like theft and robbery and man-made calamities like storm, thunder, lightning, floods, etc.

    The premium for both the policies are different. The third-party liability only policy is fixed as per the regulations of the IRDAI. However, the premium calculation for comprehensive plan depends depends on a number of factors like:

    • Age of the insured
    • Registration city
    • City of residence
    • Driving track record
    • Insured Declared Value
    • No-claim bonus
    • Extra accessories
    • Purpose of the vehicle
    • Claims history
    • Manufacturing and make of the model
    • Engine capacity and vehicle maintenance
    • Deductibles
    • Depreciation

    You can calculate the car insurance premium online for free on any trusted third-party website or on insurer’s website as well. The online car insurance premium calculator is a tool that helps you calculate the premium without any hassle with few details. You can get firsthand information without any help of any agent or middleman.

    The formula used for car insurance premium calculation is:

    The final premium amount calculation = Own damage premium + add-on covers+ third-party cover + Personal accident cover – no-claim bonus (if applicable)

    Depreciation plays a huge role when you claim for an insurance and when you renew the car insurance policy. The rate of depreciation is applied the moment the car is driven out of the showroom. Unless you have an add-on zero depreciation cover, which does not take depreciation factor into consideration, the below rates are applicable.

    Depreciation percentage based on Vehicle’s age:

    Percentage of Depreciation Age of the vehicle
    5% Between 0 to 6 months
    15% Between 6 months to 1 year
    20% Between 1 to 2 years
    30% Between 2 to 3 years
    40% Between 3 to 4 years
    50% Between 4 to 5 years

    Key features of car insurance premium calculator:

    • It is a hassle free process and easy to access. It is time and money saving tool.
    • You can instantly know the premium you are supposed to pay for the renewal or purchase of the policy.
    • It will help you compare various policies and their benefits, thereby helping you make a clear decision.
    • It will help you in negotiating with the insurer for a better deal as you already know the premium amount you should pay.
    • Since it is an online tool, you can access it from anywhere and if you have the insurer’s app, you can access it on the mobile app as well.

    The insurance premium rate is also dependent on the add-on cover you choose. It is definitely not necessary that you choose all the ass-on covers or most of them because the insurer says so, but you should always choose what is necessary for you. Please note that the premium for each cover is different. Here are some of the add-ons you can choose from:

    • Zero-depreciation cover
    • Engine protection
    • Key replacement
    • Anti-theft device cover
    • Return to invoice cover
    • No-claim bonus protection
    • Roadside assistance
    • Personal Accident cover
    • Daily cash allowance
    • Loss of personal belongings