7 Factors that Affect Your Car Insurance Premiums

Insurance for vehicles is something no vehicle owner should overlook or ignore. Third-party liability is mandatory but, at the same time, one must also opt for comprehensive coverage because the former does not reimburse vehicle owners for personal injury or damage to their vehicle. When one sets out to get insurance for vehicles there are several factors that can affect the premium.

Engine Capacity

Insurance companies in India charge premium according to engine capacity. This is divided into three slabs. The lowest premium is for cars with engine capacity below 1000 cc. The next slab is for engine capacity up to 1500 cc and then the third-highest slab is for engine capacity above 1500 cc.

Indian or Imported?

Indian cars attract standard premiums but if you fancy an imported expensive car then the premium will be exorbitant.

New or Old

The insurance premium is calculated on the invoice value of the car, also known as Insured Declared Value or IDV. If you buy an old car then the insurance premium will be calculated on the depreciated value of the car and also other considerations such as market demand for such models. Premium may be lower for used cars.


Cities and regions are classified differently by insurance companies for the purpose of calculating the premium. Metros and other cities with high traffic fall in one category where the premium is higher than for other grade cities and rural areas.

Driving Habits, Profession, Age

The insurance company may also take into consideration driving habits, the profession of the vehicle owner and his age. Youngsters are known for rash driving and insurance companies may charge higher premiums.


Premium will not cover extra accessories that are not standard in the car like windshield wipers and music systems. If you have a lot of accessories installed and want them to be covered by insurance you will need to pay a higher premium.

Exclusions and Riders

Car owners may buy comprehensive insurance and think the entire car is covered but surprisingly there are exclusions such as plastic parts, rubber tires, windshield, engine, and electricals. If you want these to be included in your car insurance, the extra cover needs to be taken in the form of add-ons.

Commercial Car Insurance is Comparatively Higher than Private Car Insurance

Owing to the higher amount of usage, the cost of insurance for a commercial car is slightly higher as compared to a private car.

As can be seen, buying car insurance is not a simple matter like shopping for a product. You have to compare offers from various insurance companies and look at the fine print for exclusions and terms. The lowest premium may not necessarily be the best; the same applies to higher premiums as well. Carefully examine what they have on offers, like roadside assistance and alternate vehicle if your vehicle breaks down. It is also worth checking if the insurance company has arrangements with garages and settle bills directly.

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

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