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Have you been paying the right premium for your car? Read on to know exactly how your premium gets calculated.
So, you have purchased car insurance because it is mandatory. Or you are one of the smart folks who love your car and know that a good insurance is the best way to protect it. In either case, don’t you wish to know the secret sauce, which insurance companies use to come up with a figure? Or how with those secret ingredients they calculate your Car Insurance premium?
Let’s unwrap the mystery – one fold at a time.
Components of car insurance premium – the secret ingredient
Components of premium would depend on the type of cover – Third party (TP) or Comprehensive Cover
Third Party Cover (TP)
The third party insurance covers damages triggered by your vehicle in the event of an accident. It is mandatory, as per the Motor Vehicles Act (1988).
The basic premium for TP cover depends on the Engine capacity or cubic capacity of the car. The more the cubic capacity, the higher is the premium.
While the total premium paid is the **sum of basic premium and the amount for personal accident cover** for owner/driver*.
Personal Accident cover – Under personal accident cover, you (or your nominee) will get compensation of up to **Rs. 2,00,000** in case of death or disability of owner/driver. Also, for any car this cover is offered at **Rs. 100.**
Comprehensive insurance gives you all the benefits of a third party cover and also covers your car damage in an accident. Thus, the premium for this cover depends on:
It is major component of comprehensive cover. It depends on the own damage factor and the Insured Declared Value (IDV).
Own Damage Factor - The own damage factor is a standard factor decided by Motor tariff. It depends on the engine capacity of the car, the location of the RTO registration and age of the vehicle.
Insured Declared Value (IDV) of the car – Your insurer decides IDV based on the ex-showroom price and percentage depreciation. In case of theft or if the car gets completely damaged, you will get back the money equal to the IDV you declared while buying the policy. The older the car, the lesser is this value, and thus the premium.
The percentage depreciation value depends on the age of the car.
This includes any applicable discounts. There are around 8 discounts in case of a car insurance. Among those, the common ones would be:
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This is the percentage discount on car insurance premium offered by the insurer for claim free years. The details of NCB bonus/discount are mentioned below
D) Additional covers
Any extra covers that you buy by paying more premium will be an additional cover. Different insurers offer different additional covers like personal accident cover for passengers; cover for electrical and non-electrical accessories; an add-on cover like zero depreciation cover, engine protect cover; etc. You can buy more than one additional cover for your car. Depending on the number of these coverages you opt for, the premium would increase. This infographic has a list of recommended add-on covers and their impact on the premium.
Using the ingredients above, the premium is calculated as:
Total Third Party Premium =
Total Third Party premium
the value of your car (IDV)
location of RTO
* For personal accident cover a standard amount of Rs. 100 for is charged for all cars.
** Service Tax – For any cover, a standard percentage of service tax is applicable. It is a common component for both the covers (TP and comprehensive).
That's it! Now you know how Car Insurance premium gets calculated. If you got all that – you have earned yourself a cookie. You can check out the premium amount for your car here.
If you haven’t, don't worry – you can always bookmark this article and get back to it later. If you have any other questions you can leave them in the comments. If you need help in finding the best policy for yourself, you can schedule a call back below, and we’ll get back to you ASAP.
Thanks for reading.
Disclaimer - Above mentioned prices are for a 2 years old Maruti Wagon R, 1.2 VXI AMT OPT (1197 CC) registered in Mumbai & previous policy has expired.
What is a Car Insurance Premium Calculator?
A car insurance premium calculator is an online tool that helps in calculating the right amount of premium payable for a specific car insurance coverage policy. You can utilise this tool completely free of cost on Coverfox
What determines car insurance premium amount?
A third party car insurance premium amount is set by IRDAI on an annual basis, it is fixed. A comprehensive car insurance premium amount depends on the age, location, IDV, depreciation, engine type, fuel type, etc.
How does IDV affect Car insurance Premium?
It is simple, a lower IDV means a lower premium payable amount while a higher IDV means a higher premium payable amount. IDV is the maximum amount an insurer will provide in case of complete loss or theft of the vehicle.
What are the Different Types of Car Insurance Cover?
The different types of car insurance cover in India are third party liability, comprehensive cover, stand-alone OD premium cover, and pay as you drive insurance cover.
What is Own Damage Premium in Car Insurance?
Own damage refers to the damage sustained by your own vehicle in case of an accident. You need to pay your own-damage premium for availing of OD cover.