9 Factors That Impact Your Car Insurance Premium


Premiums paid against car insurance can be mysterious if you are unaware of the nitty-gritty involved. To take an example, you and your friend may have the same car model, but insurance premiums may be different. Wondering why so? How do the same car models have different policy rates? Why is your car insurance premium higher than that of your friend’s car insurance? This is because certain factors impact car insurance premiums.

Explore these factors and you will be able to reduce the premium rate of your car insurance.

Gender and Age

Precisely speaking, young men are more prone to meet accidents when compared with young women. So, the chances of filing claims with men are higher. Given that, men are given car insurance at a higher premium rate as compared to young women.

Insured Declared Value

Insured Declared Value or IDV is the current market value of your car. Usually set by your car insurance company, this value is the existing price estimation of your vehicle after deduction of the depreciation value. The IDV of cars continues to decrease according to the passage of time. This leads to falling the value of your car, thereby affecting car insurance premiums. Note that the higher your vehicle’s IDV, the higher the premium of your car insurance.

Safety Aspects

Motor insurance is typically designed to safeguard your vehicle from several possible risks. However, if your car comes equipped with safety equipment, such as handle lock, gear lock, airbags, GPS tracking device,  to name a few, it would have an effect on the insurance premium. Such safety equipment enhances the safety of your car from being stolen. This instills confidence in the insurance company that you will not file frequent insurance claims. So, the insurance provider considers these amenities while setting the premium rates.


Location – or we can say the place you reside – is another factor to impact your car insurance premium. For instance, if you are living in an accident-prone area, then the chances of increased premium rates in comparison to someone living in a relatively quieter area will be higher. Therefore, if you are residing in a metro city, then you will pay a higher premium for your car insurance. The logic being, the possibility of mishaps or accidents due to heavy vehicular traffic is higher. Moreover, car thefts are prevalent at certain places with low literacy rates and great unemployment. This is also a point of consideration.

Types of Coverage

Generally, motor insurance is of two types: Comprehensive Motor Insurance and Third Party Motor Insurance. If you choose comprehensive car insurance, you will end up paying a higher premium, but a the same time, this insurance is essential. On the other hand, if you opt for third party coverage which is legally mandatory, the premium will be lower.

  • Comprehensive Motor Insurance – Comprehensive insurance covers damages incurred due to accidents, natural calamities,  third party liabilities, terrorist attacks, fire, theft to name a few. You can enhance the coverage with a few add-ons like engine protection, protection of NCB benefit, Zero Depreciation (it ensures the value of your car does not go down with the depreciated vehicle), tyre protection and roadside assistance.
  • Third-Party Motor Insurance – When it comes to car insurance, you are the first party in the policy. If you meet an accident that involves another person, then that person is the third party. To the thirst party, you will be liable to pay damage charges. The third-party insurance policy covers claims for such damage and loss.

 Whatever type of coverage you choose is up to you.

Car Price

Note that the price of your car insurance premium also affects the add-ons that you purchase. Though these add-ons add to the policy premium, they bring you peace of mind and in real-time use in case you meet a bad accident and your vehicle undergoes several damages. Zero depreciation will cover repair or replacement for both plastic and metal parts.

Claim Frequency 

The frequency of claim is another factor to impact your car insurance premium. An individual with no claim during a policy year is awarded by the insurer discounts on premiums for the following year. This benefit is known as the No Claim Bonus (NCB).

Fuel Type

Car insurance premium also differs with the type of fuel your car uses, such as Petrol, Diesel, LPG, CNG, or electric. In case of a CNG engine, the premium amount in India is Rs 60 and additional taxes for third party policies.  For comprehensive policy, the premium amount may differ depending on whether the CNG kit is fitted externally or internally.

Engine’s Cubic Capacity

Your car’s cubic capacity (CC) also affects the insurance premium. The larger CC of your car engine, the higher the premium and vice versa.

Now that you have understood what actually impact your car insurance premium and raise the premium rate. Use above factors when buying a car insurance policy. One more thing, read the policy coverage and exclusions, etc in the policy document, carefully before opting for an insurance policy for your vehicle.

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