Both Samina and Riya bought a Toyota Etios on Christmas eve and decided to go for the same car insurance policy offered by the very same car insurance company. However, they have to pay different premiums in spite of buying the policy from the same insurance provider. Why is this the case, you may wonder. The main reason for this difference in premium is due to the fact that the city of registration of Samina’s car was Bangalore and Riya registered her car in Varanasi.
Still, confused? Let us explain. Samina’s car which is in Zone A is more prone to accidents and the risk of theft. This increases the risks and liabilities of the insurer which is why she has to pay a higher premium for her car. Riya on the other hand, having registered her car in an RTO in Varanasi, has to pay a lesser premium as the risks incurred by virtue of the geographical location of the car are lesser.
Calculating Car Premiums Based on Different Regions
The zone in which the car is registered plays a crucial role in determining the premium. For the purpose of premium calculation, India is divided into two zones, namely Zone A and Zone B.
Zone A
This includes 8 cities, namely, New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad. These are so categorised as the vehicles in these cities are more prone to risks arising from heavier traffic and higher population. These areas also have a higher incidence of theft and accidents. The car insurance premium in these areas is calculated as follows (considering that the age of the car is constant) -
| Age of vehicle | For cubic capacity less than 1000cc | For cubic capacity between 1000cc and 1500cc | For cubic capacity more than 1500 cc |
|---|---|---|---|
| When the car is less than 5 years old | 3.127% of IDV of the car | 3.283% of IDV of the car | 3.440% of IDV of the car |
| When the car is between 5 and 10 years of age | 3.283% of IDV of the car | 3.447% of IDV of the car | 3.612% of IDV of the car |
| When the car is above 10 years of age | 3.362% of IDV of the car | 3.529% of IDV of the car | 3.698% of IDV of the car |
Zone B
This zone includes the rest of India barring the 8 cities in Zone A. The premium rates in this zone are comparatively lesser than Zone A cities and are calculated as follows -
| Age of vehicle | For cubic capacity less than 1000cc | For cubic capacity between 1000cc and 1500cc | For cubic capacity more than 1500 cc |
|---|---|---|---|
| When the car is less than 5 years old | 3.039% of IDV of the car | 3.191% of IDV of the car | 3.343% of IDV of the car |
| When the car is between 5 and 10 years of age | 3.191% of IDV of the car | 3.351% of IDV of the car | 3.510% of IDV of the car |
| When the car is above 10 years of age | 3.267% of IDV of the car | 3.430% of IDV of the car | 3.596% of IDV of the car |
The IDV is the Insured Declared Vehicle of the car i.e. the market value of the car used for car insurance premium calculation.
Other Factors on Which Car Insurance Premium is Calculated
- The cubic capacity of the vehicle or the type of engine will directly impact the premium in both a third-party insurance cover and an own damage cover. For instance, the premium paid for a 1500cc engine will be much higher than that of a 1000cc engine.
- The Insured Declared Value of the car is the maximum amount that you can claim on your auto insurance policy and this is the most important factor in determining the premium of the car. The IDV factors in the age of the car and the depreciation costs of the vehicle. Needless to say, the IDV reduces with an increase in the age of the car, exacting a lower premium for the same.
- Fuel type of the car i.e. if the car runs on CNG, LPG, diesel, or petrol will affect the premium rates. Diesel cars usually have a higher premium than petrol, CNG, or LPG cars.
- Utilisation of the car, i.e., whether the vehicle would be used for private or commercial purposes. The insurance cover for each will be different as the risks associated with each are different. For instance, the premium charged in case of a car being used for commercial purposes will be higher as the car will be more frequent on the roads and also due to the fact that the owner of the vehicle earns some income out of using it.
- Motor association membership (in accredited associations such as the Automobile Association of Southern India or Automobile Association of Upper India) can be extremely useful for the insured as most insurance companies offer a discount of up to 5% on own damages cover.
- Installation of anti-theft devices and safety devices on the car is beneficial for the insured as this will reduce the premium rates charged by the insurer. Features such as locks, advanced braking systems, airbags, anti-theft devices, and GPS tracking reduces the risk of damage or theft to the vehicle, thereby making it a safer bet for the insurer. Most insurers offer a 2.5% deduction on the premium subject to the kind of safety device that is installed in the car.
- NCB or No Claim Bonus is the amount that the insured receives for not making any claims against the existing insurance policy in the term of the insurance. Hefty discounts can be availed by the policyholder if he or she has a lot of accumulated NCB against his or her name.
Conclusion
The insured can save significantly in the insurance premium paid by making smart well-informed decisions. Employ the different suggestions given above, research properly, and exercise diligence to ensure that the policy cover provides maximum benefits at minimum costs.
