As per the Motor Vehicle Act, it is compulsory for you to purchase a car insurance whether you buy a new or a used vehicle. In addition, you may purchase a comprehensive cover as well. The basic type of insurance can only protect you against financial and legal liabilities towards a third party.
However, a comprehensive car insurance premium is a cost paid to cover your vehicle against any possible unseen damage due to accident, fire, theft, cyclone, flood etc. Here, we will take you through the steps and procedures involved when you secure a car insurance premium.
What Is Car Insurance Premium?
A car insurance premium is the amount you pay your insurance company on a regular basis, often every month or six months, in exchange for insurance coverage. It is recommended for a car owner to get a car insurance premium to cover against any devastating loss, such as theft or accident.
Once you’ve paid your premium, your insurer will pay for coverages detailed in the insurance policy, such as liability and collision coverages. Every insurance company determines its rates in a different manner, but your premium is usually based on details about you, the type of car you own and the coverages you select.
How Is Car Insurance Premium Calculated?
To calculate the insurance premium of your car, you can make use of a car insurance premium calculator. This online tool takes a few factors into account and calculates your four wheeler’s insurance premium. Using the car insurance premium calculator, a policy holder can choose the ideal car insurance plan for your four wheeler.
Factors such as car’s make, model, variant, registration year, and RTO are taken into account to calculate an accurate comprehensive car insurance premium. To understand how a car insurance premium is calculated, you can refer to this simple formula:
Car Insurance Premium = Own Damage Premium – (NCB + Discounts) + Third-Party Liability Premium
Note that the Third-party Liability Premium is fixed by IRDAI (Insurance Regulatory and Development Authority of India).
In order to use the car insurance calculator online, follow the steps mentioned below:
- Select your car’s model, make, fuel type and variant.
- Select the RTO of your car from the given list.
- Select the year in which you purchased your car.
- Select Yes if you have previously made a claim, else select No.
- Now press ‘Calculate’ button
- The calculator will now display the estimated premium and Insured Declared Value of your car.
Car Insurance Calculators:
https://www.policybazaar.com/motor-insurance/car-insurance-calculator/
https://www.icicilombard.com/motor-insurance/car-insurance/car-insurance-calculator
Factors That Influence Car Insurance Premium
The car insurance premium is calculated after determining several factors that are listed below. It usually involves a combination of these factors and its proprietary algorithms to tailor the best insurance rates for your car.
- Car’s Make and Model – Every car features a different cost of repair and cost of spare parts. Since car insurance covers the cost of damages, theft etc., the insurance premium differs from one car to another. In simple terms, higher the cost of the car, higher is its premium.
- Policy Coverage – A crucial factor which plays a role in determining the car insurance premium is the policy coverage. The premium depends on what type of plan you choose. There are mainly three plans you can choose from: Third-party, Own Damage and Comprehensive. In each of these cases, the premium differs for each plan.
- No Claim Bonus (NCB) – It is basically a discount for not filing a claim in the previous policy year. No Claim Bonus (NCB) is retained even if you switch between insurance companies, and is increased for every consecutive claim-free year and goes as high as 50% discount on the premium.
- Insured Declared Value (IDV) – IDV is the approximate market value of your car. With a comprehensive policy, the insurance policy will pay the IDV amount in the event of total damage or theft. Higher IDV will lead to higher premiums.
- Add-ons – The car insurance premium also depends on the add-ons you choose, along with the basic policy. You can choose additional benefits for your policy, like Zero Depreciation, Engine Protect, Roadside Assistance and a lot more. They all come with an extra cost, which increases the car insurance premium.
- Discounts – Insurance providers offer several discounts for good behaviour such as safe driving, renewing policy ahead of schedule and much more. You can use them to enhance your coverage or save on your premiums.
- Compulsory Personal Accident (PA) Cover – According to law, buying a Personal Accident cover is mandatory if you drive a car in India. It offers you coverage of up to Rs. 15 lakhs against accidental injuries or death. Buying this cover will increase the car insurance premium.
- Goods and Service Tax (GST) – Once you have customised and finalised the car insurance plan you wish to purchase, 18% GST will be applied to the final premium amount. It is applicable to car insurance plans for all general insurance companies in India.
Can Car Insurance Premium Be Reduced?
It is possible to reduce your insurance premium, but some factors are harder to change than others, while some can’t be changed at all. You can usually customise your insurance policy to fit your needs and budget, as long as you stay within the insurance requirements in your state.
Many insurance companies will show a breakdown of your coverage, so you can make an informed decision, balancing the lower premium cost with increased risk. Here are a few tips that can help you reduce your car insurance premium.
- Avoid Small Claims – If you can afford to pay for minor damages yourself, you will save money on your car insurance premium by not filing a claim.
- Renew Car Insurance Policy on Time – If you renew your policy late, you may lose the NCB and will be forced to pay a premium when you apply for your next policy.
- Transfer No-Claim Bonus (NCB) to a new car – If you have a good NCB, you can transfer it to your new car when you buy it. It will give you a discount on your new car insurance premium.
- Opt for Pay as You Drive Insurance – Pay as you drive insurance plan allows the policyholder to save up on their own damage premium depending on the total number of kilometres covered in a policy year. It is a comprehensive car insurance plan that helps a policyholder reduce his/her premium based on the usage of the car.
- Increase Voluntary Deductible – It is an amount that the policyholder agrees to pay ahead of submitting the insurance claim. It is determined by the policyholder based on their affordability. The higher the voluntary deductible, the lower the insurance premium and the higher the discount.
- Buy Car Insurance Online – Buying your car insurance online can save you a lot of money. You can compare quotes from different insurers and find the best deal.
Summary
This article covers in detail the steps involved if you are looking to purchase a car insurance premium. Insurance premiums vary widely among insurance providers, so it is advisable to get several quotes from various car insurance companies before making a final purchase. The importance of a car insurance premium is evident from the fact that it is made compulsory by law in order to lawfully drive a vehicle.
Hence, the important reason to get your vehicle insured is being able to lawfully drive your vehicle and avoid any hefty fines and penalties that you might face in the future when you drive an uninsured vehicle. From accidents to car thefts, things can turn sour in an instant, so it is better to prepare for the worst and invest in a car insurance premium.
FAQs About Car Insurance Premium
Is car insurance premium higher on a new car?
Yes. Mostly, the new car insurance premium is higher than the premium for old cars. This is because the car loses its value with age due to depreciation and its IDV reduces. With a lower IDV, the premium of a car also gets lower. But the IDV is at its highest when it is new and thus, it costs more to insure it. However, the premium of a car also depends on several factors such as make and model of the car, add-on covers, no claim bonus, engine capacity etc.
Which insurance is best for a new car?
It is best to get a comprehensive car insurance premium when you are purchasing a new car. This is because it not only covers your brand-new car against third party liabilities but also covers any loss or damages caused to the car due to unforeseen incidents, unlike third party car insurance.
Also, new cars are more prone to theft as they easily catch the eyes of miscreants. Hence, it is advised to opt for the comprehensive four-wheeler insurance for your new car.How long do you have to get insurance on a new car?
When you buy a new car, you need to compulsorily buy a third-party insurance for a period of at least three years. This new law has been implemented by the IRDA or the Insurance Regulatory & Development Authority of India and has made it mandatory for all new car owners to buy this third party insurance for a period of three years.
However, the decision to buy a comprehensive car insurance policy for your own damage cover is upto you. In case you want to buy your own damage cover, you can check the new car insurance price offered by different insurers with the help of a vehicle insurance calculator.What are the factors that affect the car insurance premium?
Factors like the Insured Declared Value of the car, age, and type of the automobile, engine’s cubic capacity, geographical location etc. dominate the calculation of the premium of your car insurance.
Some other crucial factors include policy coverage, no claim bonus (NCB), Insured declared Value (IDV), Add-Ons, Discounts, Compulsory Personal Accident (PA) Cover and Goods and Service Tax (GST). Go through these factors in detail in order to secure the best car insurance premium from your preferred insurance company.What is the importance of a car insurance renewal premium calculator?
It is a significant tool which helps to determine the car insurance premium in a convenient manner. Potential insurance buyers can get car insurance quotes in a matter of a few clicks and you can choose to compare and pick the plan that fits your budget and fulfils your insurance needs.
