How Your Car Insurance Premium Gets Calculated?

Car Insurances 200 views

It is important that your car must come with an insurance policy as it offers a cover against the losses arising out of accidents to the vehicle. Car insurance can be divided into comprehensive and third party. Under comprehensive insurance, car can be insured against any risk resulting from damage or theft, death of driver and passengers in the vehicle during the time of accident. Typically, this insurance provides cover to cars that get damaged as a result of natural calamities like earthquake, typhoons, floods, as well as due to other circumstances such as strikes, riots, thefts, etc. Third party insurance offers cover for the damage caused to other vehicle by your car only. This does not provide cover to the theft, accidents or damage to your vehicle. Coverage under the insurance type includes permanent injury/death of a person, damage caused to the property, etc.

While you take the insurance policy for car, you have to pay a certain sum towards the premium. It can be paid either monthly, quarterly or annually. An insurance policy includes two basic components of Liability Premium and Own Damage Premium. You will have to pay Liability Premium, a minimum premium amount fixed by the Insurance Regulatory Development Authority of India (IRDAI). While Own Damage Premium is a certain portion of the Insured Declared value (IDV) of the car. Look below some of the factors that determine the premium amount on your car insurance.

IDV of the car-The value of your vehicle will be decided on the IDV computed under comprehensive car insurance policy. IDV refers to the maximum amount that one can claim in the event of any loss or accident to the car. It dictates the amount of premium payable on the insurance.

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Now know how IDV is calculated.

IDV=Ex-showroom price of car+ accessory cost if any-depreciation value stipulated by IRDAI at a given point of time

Based on the age of car, the depreciation comes in the range of 5%-50% of the ex-showroom price.

Car's cubic capacity-The premium amount is also influenced by your car's engine power. The premium amount will be more in higher cubic capacity (CC) compared to the vehicle with less CC.

No Claim Bonus-No Calim Bonus (NCB) is a sort of discount that you can avail if not made any claim in the previous year. With NCB, you can save around 50% on the Own Damage (OD) premium.

Discounts-You will get discounts under OD Premium if you install anti-theft devices such as a car alarm, become member of Automobile Association of India, and go for voluntary deductible or excess.

Accessories-Electronic or electrical accessories fitted into the car, such as CD/DVD players, CNG/LPG units, can be insured at an extra amount provided the cost of such items are not included by manufacturer while selling the vehicle to you.

Please find below the sample calculation method of car insurance premium based on assumed values of ex-showroom price, depreciation and others for your understanding.

ParticularsDetailsDetails
Manufacturing Year2012Comprehensive Policy with NCB
Ex-showroom price4,71, 613
Depreciation20% Rs 94,323
IDVRs 3,77,290
Own Damage Premium1.970%Rs 7,432
NCB Discounts20%Rs 1,486
Total OD PremiumRs 5,946
Personal Accident CoverRs 200
Legal Liability Paid to driver Rs 50
Compulsory Third Party CoverRs 1,110
Net PremiumRs 7,306
Service Tax14%Rs 1,023
Total PremiumRs 8,329
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Bajaj Finserv 10.99% - 16.00%
Fullerton India 14.00% - 33.00%
HDFC Bank 10.99% - 20.70%
ICICI Bank 10.99% - 18.40%
IndusInd Bank 12.99% - 20.00%
Kotak Bank 10.99% - 17.99%
RBL 14.00% - 18.00%
Standard Chartered Bank 10.99% - 14.49%
Tata Capital 11.49% - 18.00%
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ICICI Bank 8.35% - 8.85%
Axis Bank 8.35% - 8.75%
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Indiabulls Housing Finance Limited 8.35% - 8.55%
Kotak Bank 8.35%
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