10 Factors that Affect Your Car Insurance Premiums

Type of Car (Make, Model, Engine Capacity)

Your vehicle's make, model, and engine size significantly affect your insurance premium. Luxury or high-end cars, such as sedans and SUVs, tend to attract higher premiums because their spare parts and repair jobs are more expensive. The same goes for vehicles with high engine sizes because they are classified as risky and, therefore, premium payers.

Age of the Car

The vehicle's age is a key consideration when assessing what factors affect car insurance premiums in India. When a vehicle is old, its market value decreases, reducing its Insured Declared Value (IDV). IDV is an essential factor determining the premium; thus, old vehicles have lower premiums. Very old cars may attract higher premiums due to frequent breakdown risks and the difficulty in sourcing spare parts.

Location/Zone of Registration

Your city’s traffic density and accident rates are closely tied to what factors affect car insurance rates. Where your vehicle is registered also affects the premium. Metropolitan cities like Mumbai, Delhi, and Bangalore are high-risk areas with higher traffic congestion and accident threats that attract higher premiums. Cars registered in rural or sparsely populated regions may have lower premiums.

Type of Coverage (Third-Party vs Comprehensive)

Third-party insurance is compulsory in India and ensures damages to other parties. But no damage to your car. Comprehensive insurance, including third-party liability at the very least, plus damages to your vehicle through accidents, theft, natural calamities, etc., differs from third-party insurance. Comprehensive policies, of course, are costlier because of the more exhaustive coverage involved.

Insured Declared Value (IDV)

The IDV is the current market value of your vehicle and is the highest amount the insurer will pay in the event of total loss or theft. The higher the IDV, the greater the premium, and vice versa. Fixing an optimal IDV to provide sufficient coverage without overpriced premiums is necessary.

No Claim Bonus (NCB)

No Claim Bonus is a premium discount by insurance companies for a claim-free period every year. The bonus can reduce the premium by up to 50% across successive years of a claims-free period. Maintaining your driving history free of spots and not making frivolous claims will increase your gain.

Add-On Covers Chosen

Add-ons like zero depreciation and engine protection also influence what factors determine car insurance premiums. Common add-ons are:

• Zero Depreciation Cover

  Pays for the replaced parts' entire life without considering depreciation.

• Engine Protection Cover

  Pays for engine damage caused by water entry or oil leak.

• Roadside Assistance

  Tows down the vehicle in case of a breakdown.

• Return to Invoice

  Pays the difference between IDV and the invoice cost of the car.

Despite this, the add-on offering coverage also adds to the total premium amount.

Claim History

Frequent claims are more risky for the insurer, resulting in higher premiums. Further, claims for minor damages result in the No Claim Bonus loss, which also raises the premium. It is advisable to consider whether it is worth claiming for the minor damage or bearing the expense from one's pocket to save the NCB.

Safety and Anti-Theft Devices

Installing safety and anti-theft devices approved by the Automotive Research Association of India (ARAI) can reduce premiums. The devices reduce the risk of theft and damage, making the car safer for insurers.