As per the Motor Vehicle Insurance Act, all motor vehicles must have third-party insurance. If you are a car owner, availing of car insurance will benefit you with financial protection during unforeseen situations and also fulfil the legal requirements. Purchasing car insurance is important, but it can be daunting to determine its premium before purchasing. You must find an insurance policy that comes with economic coverage and also meets your needs. Essentially, you can compare quotes from various insurance companies to simplify the purchase. The typical cost of an annual auto insurance premium in India may range from INR 10,000 to 20,000 or even more. The following article proves to be quite valuable if you are confused or unaware of how to calculate your car insurance premium before purchasing.
Why To Calculate Car Insurance Premium Before Buying?
When you decide to buy car insurance, you must first understand the typical premium cost. You can form different insurance companies to make a judicious decision. The exhaustive comparison will help you gauge the amount you would have to spend monthly or yearly for your car insurance. Calculation of premium enables you to find the correct balance between premium cost and coverage.
While calculating the premium, you can adjust factors like coverage limits and deductibles. As a result, you can check how these factors affect the premium. The particular analysis will help you tailor the insurance plan to your needs and budget.
Thoroughly understanding the premium structure makes sure you will not overpay for superfluous coverage or features.
Calculating the insurance premium well in advance can also affect your car choice, i.e., when you have to choose from multiple options. As a result, the precise calculation of premiums will help you choose the best premium car insurance plan.
Aspects To Consider While Calculating Car Insurance Premium
You, as a car insurance holder, should consider the following aspects when calculating the premium amount:
Car type
Generally, you get lower insurance rates for some economical cars like hatchbacks. On the other hand, high-end luxury cars usually have a high cost of repairs, so their premiums are costlier. Your car’s body type also impacts the premium amount. Heavy and large cars like SUVs are susceptible to more damage during an accident. Hence, most insurance companies charge high premiums for such cars.
Fuel type
Cars operating on CNG have higher insurance premiums than petrol and diesel cars of a similar model. Diesel cars have higher premiums than petrol cars because the premium amount is directly proportionate to the car’s price.
Insured Declared Value (IDV)
Irrespective of whether the car is old or new, all vehicles have a value determined based on IDV. It represents the maximum amount you can claim for the loss of a car. Newer cars have higher IDVs, so they have higher premiums. Conversely, older cars come with lower IDVs owing to significant depreciation. Hence, their insurance premiums are lower.
No Claim Bonus
You benefit from the no-claim bonus if you haven’t made any claims for the last year. It helps you save up to half of your own damage premium.
Add-Ons Included
The inclusion of add-ons helps you get additional protection, such as engine protection, zero depreciation charges, etc. If you want such extra protection, your insurance premium will go up. Make sure to compare car insurance premiums based on the add-ons included in each plan to make a wise decision.
Age Of The Car Owner
Drivers aged 25 or less are usually considered less experienced and more vulnerable to accidents, so their premiums are higher. Drivers aged above 25, comparatively, get lower insurance rates.
Note that the premium rate constantly declines as you age. For example, drivers aged 50 pay the lowest premium. Premiums for senior citizens (aged 65 or above) are higher. You can use a car premium calculator to check how the driver’s age affects the premium amount.
Car Price
The premium amount is directly proportional to the car’s price. An expensive car will cost more to repair or replace parts. Comparing premium quotes online can help you choose the best premium car insurance based on your car type and price.
Safety Functions
The latest car models are designed with advanced safety features like airbags, anti-lock brakes, etc. The inclusion of these safety functionalities will increase the premium amount. Any damage to these components means that your insurance provider has to pay more to repair/replace them.
Car insurance companies charge lower premiums for cars equipped with anti-theft devices. If your car is designed with anti-theft devices like a hidden kill switch, there are fewer chances of theft, so the premium amount is reduced.
Driving Record
A clean driving record means you are more likely to get lower insurance rates. Insurance companies determine the premium based on your car type and driving record. For example, if you have a sedan but have no previous record of accidents, your premium will be less. Remember to discuss your driving record with your car insurance company.
Formula To Calculate Car Insurance Premium:
The basic formula to calculate your car insurance premium is:
Insurance Premium = Liability Premium (as agreed by the IRDAI) + Own damage premium - (Discounts + No claim bonus) + Cost of Add-on
In the formula,
Liability Premium: the cost of the third-party liability coverage
Own damage premium: the cost of insuring your car against damages due to accidents, theft, natural calamities, etc.
Discounts denote the reduction in the premium provided as a reward
No claim bonus indicates a reward for claim-free years
The cost of Add-on indicates the total expense of additional covers (like roadside assistance cover, zero depreciation cover, etc.)
A Detailed Guide To Calculate Car Insurance Premium Online
You must be ready with the following details of your car before using an online car premium calculator.
Model
Manufacturer
Fuel Type
Registration Year
If you have filed a claim previously, then you will need the following details:
No Claim Bonus
Claim History
Once you have the above details ready, you can follow the below steps to calculate the premium amount:
Visit the website of your preferred car insurance company.
Look for general quotes or a premium calculator on its website.
In the car premium calculator, you need to choose your car’s model, make, engine, trim, and fuel time.
Specify the date of your car purchase.
Select ‘Yes’ if you have raised a claim previously and specify the corresponding claim details. If no claim is issued in the past, click on ‘No’ and proceed to the next step.
Select those add-ons you want to incorporate into your insurance policy.
You will either see the ‘Get Quotes’ or ‘Calculate’ option. Click on it.
Conclusion
Calculating the premium amount in advance will keep you prepared financially before purchasing a car insurance policy. Make sure to comprehensively compare the features, coverage, and cost of different car insurance plans from various car insurance companies. You can review the car insurance rates online and consult with an insurance agent to choose the right insurance company. Analyzing your needs, getting familiar with discounts, and comparing insurance quotes from multiple car insurance companies will help you make a smart decision. Following the steps discussed above will simplify the process of calculating your car insurance premium and make the best purchase aligning with your needs.
Frequently Asked Questions (FAQs)
What role does the market value depreciation plays when you calculate the car insurance premium?
Market value depreciation is one of the key factors when calculating car insurance premiums. It helps you determine the IDV, i.e., the maximum amount an insurer has to pay in case of car damage or theft. Calculating IDV involves factors like the car’s usage, age, and current market value. The market value depreciation increases as the car ages, leading to lower IDV and, eventually, lower premiums.
Shall I need to consider deductible(s) while buying a car insurance policy?
Certainly, you must consider deductibles before purchasing a car insurance policy. Two types of deductibles are voluntary and compulsory. The voluntary deductible represents an amount the policyholder pays voluntarily while settling the claim. This amount can reduce the premium amount. On the other hand, the compulsory deductible is pre-agreed according to the policy terms. Using a car premium calculator helps you know how deductibles can affect the premium cost.
Does a car insurance calculator help an individual save money?
If you use a car premium calculator for research, it can help you save money when purchasing a policy. It provides an estimate of the premium amounts of different insurance plans from different insurance companies so you can make an informed decision.
