The Complete Guideline On How To Calculate Your Insurance Cost

by Vivaan Khatri | 21/09/2020
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Paying for car insurance is compulsory. If you are not familiar with the insurance calculation process, IndianAuto is here to help.

Having car insurance is mandatory for all car owners. Since there are plenty of insurance offerings out there, it might take a long time for the car owner to finally land on one policy. One of the biggest concerns for insurance buyers is the price of car insurance. IndianAuto will give you the car insurance price list in India along with the detailed explanation of the car insurance calculation as well as the guide on how to find suitable car insurance.

car insurance hand over a toy car

Buying car insurance is a must for all car owners 

What are the types of car insurance plans/cover?

Basically, there are two main types of insurance plans provided by the Indian car insurance companies, which are third party liability car insurance and comprehensive insurance.

Third-party liability car insurance

The third-party liability car insurance is the types of insurance that will insure in case of damage caused by the first party (car policyholder) to the third party. The third-party could be the driver, owner or passenger of vehicles and passengers, who are injured by the vehicle of the first party. It is mandatory for all car owners to buy third party liability for their cars.

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car crash

Third-party liability car insurance is compulsory for all cars 

Comprehensive car insurance

While third-party liability car insurance is a compulsory insurance plan, comprehensive car insurance is an optional policy. This insurance plan offers a higher level of protection against comprehensive types of damages caused by road accidents or other unwanted incidents. It is worth noticing that this insurance plan also covers the third party liability car policy, meaning that you won’t have to buy both insurances to receive the comprehensive benefits. Moreover, different car insurance company includes different additional features on the comprehensive insurance policy.

Add On Covers

Add On Cover or the additional coverage is a special offering that is not included in the comprehensive car insurance plan. It also means that if you want to have an add-on cover, you will have to make an extra payment in addition to the insurance premium. Car owners can find plenty of attractive add-on offers and discounts provided by the car insurers in India. Here are some of the most common and preferred add-on covers for car insurance.

car insurance add-on

Having add-on covers can be a wise option in some particular occasions

  • Zero Depreciation/Nil Depreciation: Each time a claim is settled, the insurer will have to estimate the depreciation of your car. Over the years, your car’s value will decrease. It also means that the claim amount will also reduce. However, if you buy a zero depreciation cover, you can get the full claim amount.

  • No claim bonus: When you add No claim bonus to your car insurance plan, you will be entitled to the premium discount provided by the car insurance company if you made no insurance claim during a policy term. NCB can help policyholder save up to 50 per cent in insurance premium.

  • Engine Protector: Car engine is one of the most expensive parts of a car. In most case, the cover for car engine damages is not included in the car insurance policy. Under the Engine Protector policy, expense on repairs or damages which are not caused by accidents will be covered. This add-on option is highly recommended for luxury and high-end cars whose engine repairs are very expensive. However, only cars that are under three-year-old can be covered by this add-on.

  • Roadside assistance: Among these add-on covers, roadside assistance is the most practical and important. If you include this add-on on your insurance policy, the cost for road assistance like towing, fuel-refilling, flat-type change, mechanic aid in case of car breakdown will be provided by the insurance policy companies around the clock.

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What factors to consider when buying car insurance

Find the right policy

Basically, car owners are provided with two main options, comprehensive cover and third-party liability policy. If you own an expensive luxury car, the comprehensive cover is highly recommended. On the other hand, the liability policy is compulsory so it would be the option if you found the comprehensive policy are not necessary for you.

Find the right insurer

Most car insurers provide both the comprehensive policy and third-party liability policy. However, the coverage that each insurer offers is different. Besides, each insurance company also has different add-on cover offerings. You should find a car insurance providers with a suitable policy for you. Apart from considering the policy, it is also important to find an insurance company with a good reputation, high claim settlement ratio, services and customer support.

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choose insurance

Choosing a good insurer is a very important part of the process 

Check the premium

After doing research, you probably have a list of the insurers and policies that you are interested in. Now you can estimate the premium that you will have to pay. Some insurers provide online calculator which allow you to check the quote. Knowing the premium will be a crucial step before you make the purchasing decision.

What are the important factors when calculating insurance premium?

One of the most important step before buying a car insurance policy is to estimate the car insurance price. However, there is no fixed formula for calculating the insurance premium. In fact, each automotive insurance company has a different way of calculating the premium for their policyholders. Car premium calculation also depends on various factors. To check the closest premium amount for your car insurance, you can visit the site of the insurance provider. Based on the information that you give, the online premium calculator will give you the exact number to consider.

car insurance

Insurance premium calculation is based on different factors

In the following, IndiaAuto will give you some basic factors that play important roles in determining the car insurance cost in India.

1. IDV (Insured Declared Value)

Insured Declared Value could be defined as the market value of your car at the time of insurance purchase. However, the IDV will drop over time due to depreciation. The newer the car, the higher the insured declared value is.

2. Make-model

The car model is one of the major factors when it comes to insurance calculation. The more premium and high-end the car model is, the higher the insurance cost is. For example, the premium SUV will cost higher than a regular hatchback.

3. Car modification:

Before opting for any modification to the car, you should check if the modification will affect your premium. For example, if your car was installed with an aftermarket GPS or audio system, the value of your car will be increased, leading to the hike in premium amount.

4. Engine capacity

Engine capacity is the parameter that is used by the IRDA to decide the premium for third party liability insurance. The bigger the engine capacity, the higher premium you will have to pay. IRDA amends the premium rate for third party insurance cover annually.

5. Location

Location is also one factor that would be taken into consideration when the car insurance company calculate your premium. The location of the owner or the vehicles matters as the insurers take into account the fact that some locations are safer than others. For example, vehicles from a safer neighbourhood are subject to lower chances of vandalism, theft or accidents, meaning that the lower risk for the insurer. Thereby, it will benefit the car owner with a lower premium.

6. Demographic

Besides your location, the car insurance will decide the premium amount based on what demographic group you belongs to.

  • Age: While the young drivers are more likely to drive fast and get involved in a car crash, the middle-aged drivers are usually more experienced and thereby less prone to cause a car accident.

  • Marital status: As per research, demographic of married people are less likely to have an accident compared to the single.

  • Gender: Statistically speaking, compared to female peers, young male adolescents tend to be involved in car accidents more. However, at an older age, women are more prone to car accidents than men.

  • Profession: Your profession is also one factor that determines the car insurance premium. There are some particular professions requiring more driving which can be translated to higher risks of having accidents. For example, a sales representative or marketing employee will have to do more travelling than other professions like regular office workers. So their insurance quote will also be higher.

If you are on the demographic groups that stand less risk of having a car accident, you will get a lower premium.

7. Add-Ons/Discounts

Having adds-on will increase the premium. However, it will secure you better against unfavourable situations. If you can choose smartly, it will give you a great advantage in the end. On the other hand, insurance companies also offer some discounts for policyholders that will reduce the premium amount. Here are some discount benefits that car insurance company usually offers.

  • No Claim Bonus: As explained above, the No Claim Bonus cover will be available for a policyholder who does not raise any claim during the insurance period.

  • Membership concession: Insurance companies might offer a concession for members of a registered automotive agency. For example, people with membership of Automobile Association of India you can get a concession on Own damage premium.

  • Voluntary Excess: Voluntary access is the deductible that policyholder will declare to pay when a claim is raised. Opting for the higher voluntary deductible amount will benefit you with a lower premium.

  • Anti-theft Discount: If your car is fitted with an ARAI anti-theft device, you will be offered with a discount of around 2.5 per cent on the Own Damage premium.

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How to calculate insurance premium?

Basically, the car insurance cost in India or the insurance premium is the sum of the third party cover and own damage cover. Other factors like add-ons, discounts, GTS will also be taken into account. Own damage cover is optional and included on the comprehensive insurance policy.

Third-party car insurance price list in India

The cost of third party reliability is fixed by the IRDA. The rate varies on the basis of the engine capacity. Check the following table to see the price of third party insurance policy for 2019-2020 period.

Cubic Capacity (cc) of car

Third-Party Insurance Company

Up to 1000 CC

Rs. 2072

Over 1000 CC up to 1500 CC

Rs. 3221

Over 1500 CC

Rs. 7890

Comprehensive car insurance price list in India

Each car company will come with a different plan for comprehensive car insurance policy and the cost will also vary. The following table will list out the cost of a comprehensive car insurance plan provided by the major insurance company in India.

Insurance Companies

Comprehensive Car Insurance Premium (excluding add-on and tax services)

TATA AIG General Insurance

Rs. 13,616

Digit General Insurance

Rs. 15,226

Royal Sundaram General Insurance

Rs. 17,793

Bharti AXA General Insurance

Rs. 20,071

Liberty General Insurance

Rs. 20,378

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