One of the most common excuses among car owners for not renewing their car insurance is the premium amount. To solve this problem, most insurance companies and online insurance brokers have introduced an easy-to-use online tool that helps car owners estimate their car’s market value and premium amount even before buying.
Here’s everything you should need to know about the Car Insurance Premium Calculator -
What is a Car Insurance Premium Calculator?
Car Insurance premium calculator is a tool that helps you calculate the premium amount based on common factors like the brand, age, and engine capacity of your car. It gives you an idea about the market valuation of your vehicle. This will, in turn, help you to estimate the average cost of insurance and choose your insurer accordingly. Apart from helping you save money, it also helps you make an informed decision. Unlike agents, it is unbiased and provides an objective estimate.
How does a Car Insurance Premium Calculator Work?
The formula to calculate Car Insurance Premium is very simple. Mathematically, it can be represented as -
Premium Amount = Third Liability Premium (Compulsory,*fixed by IRDAI) + Own Damage Premium – (No claim bonus + Discounts) + Add-ons Covers (if any)
To help you understand the car insurance premium calculation better, here is a sample car calculation -
| Year of Manufacture | 2018 |
| Ex-Showroom Price | INR 5,00,000 |
| Depreciation Percentage | 20% of Ex-Showroom Price |
| Insured Declared Value (IDV) | INR 4,00,000 |
| Own Damage Premium (OD) | INR 7,880 (1.970% of IDV) |
| NCB Discount (20% of OD) | INR 1,576 |
| Total OD Premium (OD - NCB Discount) | INR 6,304 |
| Personal Accident Cover | INR 100 |
| Legal Liability Paid to driver | INR 50 |
| Compulsory Third Party Cover | INR 1110 |
| Net Premium | INR 7564 |
| GST @ 18% | INR 1,362 |
| Total Premium Amount | INR 8,926 |
Factors Affecting Premium Rate for Car Insurance Premium Calculator
1. IDV (Insured Declared Value) of your car: Insured Declared Value or IDV determines the market value of your vehicle at any given point. IDV is the maximum amount that your insurer will compensate in case of total loss or theft of your car. It is the primary factor that affects the premium amount.
*PRO-TIP: Depending on the age of your car, the depreciation may vary from 5% to 50% of the ex-showroom price.
2. Fuel-type of your car: Based on the manufacturer’s price, a diesel car is more expensive than its petrol variant. Since the premium amount is directly proportional to the cost of the car, the car insurance premium for diesel cars is more than that of the petrol one. Moreover, it is costlier to get a diesel car repaired when compared to a petrol one.
3. Year of manufacture: As the car gets older, its market value also depreciates. Therefore, the IDV reduces leading to a lower premium.
4. Cubic capacity of the engine: The efficiency of your car can be gauged by its engine capacity. Those with higher engine capacity (in cc) need to pay more to keep their car insured. Here is a table to help you estimate the cost set by IRDAI based on engine capacity (in cc)
| Engine Capacity (in cc) | Premium Amount (*Effective from April 2018) |
|---|---|
| Lesser than 1,000 cc | INR 1,850 |
| 1,000 cc to 1,500 cc | INR 2,863 |
| Greater than 1,500cc | INR 7,890 |
5. Location: Higher chances of theft or accidents lead to an increase in the premium amount. Therefore, those living in urban areas like metro cities have to pay higher for their car insurance.
6. Age of the owner: Young adults who are new to driving are considered to be at a higher risk of accidents. Therefore, those in the age group of 18 to 25 years have to pay more for their car to stay insured. Similarly, those with poor eyesight due to ageing are also charged a higher premium.
7. No Claim Bonus (NCB): No Claim Bonus is a percentage discount reserved for safe riders. Those with no history of claims during their policy term are entitled to NCB discount. At the time of renewal, you can use your NCB to save almost 20% on your Own Damage (OD) premium.
8. Discounts: Most insurance providers offer additional discounts and premium services in the following cases:
- Installing an anti-theft device
- Being a membership in Automobile Association of India (AAI)
- Opting for voluntary deductibles
- Profession-based discounts for defence personnel, government employees, and doctors
Do's and Don’ts While Using Car Insurance Premium Calculator
Do's:
- Compare Plans: It is important to compare different plans from different insurers before making any transaction. This will help you get the best for your buck!
- Inclusions and Exclusions: Double-check the coverage provided by your insurer at the time of comparing. Third-Party Liability Cover is usually cheaper than Comprehensive Insurance but its coverage is limited.
- Check Add ons: Add-on Covers can improve your financial security. You can opt for some common add-on like Zero Depreciation Cover. This will, however, hike your premium amount slightly.
Don'ts:
- Avoid making small claims: Raising a claim will lead to loss of No Claim Bonus you may have collected. Before filing for a claim, compare the value of the claim amount with 20% of the total premium amount. If the claim amount is too less, it is advisable to pay from your pocket.
- Avoid policy lapse: Driving with a lapsed policy will lead to a hefty fine if you are caught. Therefore, it is best to renew your car insurance before its date of expiry. Failing to renew 90 days from the date of expiry will lead to loss of your No Claim Bonus (NCB) too.
- Avoid buying the cheapest: It may seem like a crazy idea but the cheapest policy is often not the best plan. In order to keep the price low, the insurance provider may compromise on the coverage. Make sure you make an informed decision.
