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How Does the Classification of Cars Affect Your Car Insurance Premium?

By Vikas Chandra Das
21 July 2022, 11:46 AM

Purchasing a brand-new car comes with the responsibility of selecting an appropriate insurance policy with it. While making the decision to purchase a policy, you must look into all the multiple factors that affect the premium of an auto car insurance policy.

One of the things to understand is how the classification of your car will play a crucial role in determining the cost of the insurance cover. Keep reading to know more!

Classification of Cars

The type of car that you own will have a significant bearing on the price of the insurance policy, the discounts offered, the premium of the car, and the add-ons that the insurer offers to you. The various kinds of cars, for your perusal, has been listed as follows –

Type of carDescription
MicrocarA microcar is the smallest size of cars, technically with either three or four wheels and often an engine smaller than 700 cc (43 cubic inches). These cars are known for their maneuverability and convenience. They are usually two-seater cars and are popular amongst those individuals who earlier moved around in bikes and scooters.
HatchbackA hatchback is a car body configuration with a rear door that provides access to the cargo area. They may or may not feature a fold-down three-box second-row seating arrangement. These cars can easily accommodate up to five people and do not have an extended cargo space or boot. Their size ranges from superminis to small family cars to executive cars and some sports cars as well.
SedanA sedan is a passenger car that comes with a three-box configuration with separate compartments for the passenger, engine, and cargo. Its variations include - close-coupled sedan, club sedan, convertible sedan, fastback sedan, hardtop sedan, notchback sedan, and sedanet. They can accommodate more than five people and have the feature of an extended boot. They are also longer than standard hatchbacks.
SUV or Sports Utility VehiclesSports Utility Vehicle is a car classification that combines elements of off road-going passenger cars with features from off-road vehicles, such as raised ground clearance and four-wheel drive. A standard SUV can easily accommodate five to seven persons and is designed to run over smooth roads and rough terrains.
MPV or Multi-Purpose VehicleMulti-Purpose Vehicles are popularly known as Multi-Utility Vans and are of great use due to their high carrying capacity and the convenience it offers. It typically has two to three rows of seats which can accommodate nearly six to eight passengers. The design and interior make this vehicle roomy and spacious.
Luxury carsA luxury car offers increased levels of comfort, equipment, amenities, quality, performance, and status relative to regular cars for an increased price. The brand image of the manufacturer also plays a huge role in labelling a car as a luxury car.

The Following Factors Will Affect the Cost of Insurance -

  • With each different car model, make and variant, the cost of the premium will differ.
  • The year of manufacturing of the car will affect the cost of the insurance. The lesser the age of the car, the higher the IDV would be, resulting in a higher premium.
  • Cars with high-quality safety equipment might qualify for premium discounts by the car insurance company.
  • If the geographical location of the car is in a risk-prone zone, then also the cost of insurance will differ from a comparatively low-risk zone. If the car owner registers the car in Zone A, i.e. in one of the 8 cities of Zone A, namely, New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad, then the premium will be high as opposed to a car registered in Zone B i.e. rest of India.
  • The engine capacity will also impact the premium. The higher the engine capacity, the higher is the insurance premium charged.
  • Diesel cars usually have a higher premium than petrol, CNG or LPG cars.
  • The premium charged in case of a car being used for commercial purposes will be higher as the car will be frequent on roads more often and also due to the fact that the owner of the vehicle earns some income out of it.
  • With more add-ons to the insurance policy, the insurance premium tends to increase.

Some Basic Insurance Tips to Lower the Premiums

The following tips will help you to reduce your premium significantly -

Bundling of insurance

A bundled insurance is when the policyholder is purchasing multiple insurance policies from the same insurance company. For example, one may purchase a car insurance policy, a health insurance policy, and a critical illness policy from the same insurer.

Bundling of insurance will help streamline one’s insurance portfolio and coverage experience. Insurance companies usually offer great bundling discounts. For example, if you buy car insurance and health insurance from the same company then you may be offered a discount on one of these policies.

Avail loyalty discounts

A few car insurance companies offer to its customers a loyalty discount for having availed of their services for a long period of time. If you have no qualms with your insurer then continue to benefit from their services and gain from the loyalty discount that they have to offer to you!

Compare online for the best policy for your car model

This kind of policy comparison for your car model can be done on neutral online websites that offer you a fair take on the different car insurance policies that are available. Tables, charts, and diagrams constructed on the information that is gleaned through different sources can be a good way to compare all the information at hand.

Also, talk to other car insurance policyholders and get first-hand information about the kind of insurance company that they have opted in, for a similar model. Also, check the online reputations of the insurance company by looking into the user testimonials, online reviews, and feedback, etc. Look for the best coverage by putting in a few extra hours of researching!


Insurance coverage is essential to ensure that your vehicle is protected from any untoward incident. Ensure that you choose the insurance cover after due consideration of the different kinds of policies available, the reputation of the insurer, the terms and conditions of the policy, and the kind of coverage that it has to offer.

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