4 Factors that affect Car Insurance Rates

Car insurance premiums can be very mysterious for those who don’t understand the nitty-gritty involved. For example, you and your neighbour might be having the same model, but when it comes to the insurance rate, there is a huge difference. Now, you might think, how is it possible? How can the same cars have two different car insurance policy rates? If your premium is higher than your neighbour’s, then you might wonder, “What have I done to deserve this?”

Get the basics right

There are many people who buy a car insurance policy without doing proper research or getting a proper understanding of the subject of car insurance. That is why it is important to get the basics right before buying a car insurance policy online. Do you know that it is illegal to drive on Indian roads without a proper motor insurance policy? Third-party insurance is a must for every car plying on Indian roads. For your knowledge’s sake, there are two types of insurance in India: Comprehensive and third-party liability-only.

Why do car insurance premiums differ?

Now, let us talk about the price variations with regard to a car insurance policy. There are several factors involved in computing the premium amount. These are:

Type of Insurance Cover

As said previously, there are two kinds of car insurance plans - third-party car insurance and comprehensive car insurance. As for the former, the coverage is solely for the damages caused to a third party involved in any road mishap. Over here, you or your vehicle won’t get any protection in case of an accident. As for the latter, the insurance coverage, in case of an accident, is there for both the parties- you and any third-party individual. People, normally, have the tendencies to gravitate towards third-party insurance due to the low premium involved. However, considering the risk involved on the road these days, it is better to have a comprehensive car insurance policy instead. Never select a policy solely on the basis of a premium amount. When it comes to the safety of you and your vehicle, you should not mind shelling a little extra on the premium to get the right coverage.

Safety Aspects

An insurance plan is basically there to protect your vehicle from a number of possible risks. However, if you have safety equipment, such as gear lock, handle lock, airbags, GPS tracking device, etc., in your car, then it would have a bearing on the premium you pay. With such security measures, the risk of your vehicle getting stolen decreases drastically. As a result, the insurance provider will fix the premium factoring in these safety aspects.


The place where you reside also has an effect on the premium you pay. For example, considering the huge risk factors involved in metro cities, premium amounts also increase. So, if you happen to reside in a metro, then you are required to pay a higher premium for your car insurance. The logic being, with heavy vehicular traffic, there are huge possibilities of accidents or mishaps. The premium amount will be relatively lower in a Zone B city.

Engine Type

The type of engine your car has also influenced the premium rate. If your vehicle happens to run on diesel, then you may have to pay a high car insurance premium. Diesel vehicles are more expensive than their petrol counterparts, and this aspect reflects directly in the Insured Declared Value (IDV). IDV refers to the highest sum payable by the insurer for a motor insurance policy. So, the car insurance policy for a diesel engine is higher compared to a car that runs on petrol or CNG.

It can be safely said that a car insurance policy is something that is not only important but also unavoidable. However, several aspects have to be weighed in before opting for a policy.  A good understanding of these will definitely help you get a car insurance policy that not only has a reasonable premium amount but also has an adequate safety net in the form of coverage it offers.
Read more about types of car insurance online

**To understand exactly about the policy coverage, exclusions etc read the Policy Wordings carefully.**