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Introduction of Car Insurance Premium In 2023
A car insurance policy requires your attention each time it expires as it has a fairly shorter validity time, say one, three, or five years. Then you must weigh all the options and renew the plan to get continuous coverage. You must take into consideration things like the car’s age, your current location, number of claims, etc. while renewing the plan for optimal coverage as these are some of the factors that determine the premium. In this article, we will focus on the relationship between car insurance premiums and your current location.
What is a car insurance premium?
Before we dive deep into how your current location can affect the car insurance premium let us first consider a few basics of the concept. A car insurance premium is an amount you pay to the insurer for buying a specific plan.
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You can determine the approximate amount of premium you need to pay by using the car insurance premium calculator. This is an online tool that is generally available free for use at an insurance company’s or an aggregator’s website. You can even adjust a few factors to make the premium fit your budget.
Are different premiums charged in different Indian states?
One of the major factors that car insurance companies take into account while calculating the premium is the location where your car is registered. Since car owners usually get the car registered at the nearest Regional Transport Office (RTO), it is safe to say that car insurance premium changes if you change your residential location.
Note that it does not have a major impact on premium if you move to a nearby locality. However, your car insurance premium will be revised if you migrate to another Indian state.
What are car insurance zones?
The Insurance Regulatory and Development Authority of India better known as IRDAI regulates the Indian insurance industry. As per this government body, different Indian regions are divided into two parts — Zone A and Zone B. Car insurance premium is different as per the regions where you have registered the car.
Zone A includes major Indian cities like Mumbai, Bengaluru, Ahmedabad, New Delhi, Hyderabad, Kolkata, Chennai, and Pune. While Zone B is the remaining part of the country.
Why does car insurance premium change according to insurance zones?
One of the major factors for the difference in premium is the likelihood of a claim. Urban cities are much more densely populated than rural areas. Correspondingly the population of vehicles is also very high. It results in a higher number of traffic jams, and chances of claims increase due to higher chances of accidents. Here the higher premium is to cover the higher risk involved in insuring a car.
How is car insurance premium calculated based on insurance zones?
Two factors related to the car play a major role in determining the premium amount of a Comprehensive Car Insurance Policy when it comes to insurance zones. The age of your car and the engine’s cubic capacity. Here is a table explaining the exact amount of insurance premium for Zone A and Zone B.
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Zone A car insurance premium calculation
| Car’s age | For cars less than 1,000cc | Cars between 1000 – 1,500cc | Cars with 1,500cc and above |
| Up to 5 years | 3.127% of IDV | 3.283% of IDV | 3.440% of IDV |
| Between 5 to 10 years | 3.283% of IDV | 3.447% of IDV | 3.612% of IDV |
| 10 years and beyond | 3.362% of IDV | 3.529% of IDV | 3.698% of IDV |
Zone B car insurance premium calculation
| Car’s age | For cars less than 1,000cc | Cars between 1,000 – 1500cc | Cars with 1,500cc and above |
| Up to 5 years | 3.039% of IDV | 3.191% of IDV | 3.343% of IDV |
| Between 5 to 10 years | 3.191% of IDV | 3.351% of IDV | 3.510% of IDV |
| 10 years and beyond | 3.267% of IDV | 3.430% of IDV | 3.596% of IDV |
Note: The percentage calculation mentioned above is subject to change as per IRDAI’s discretion.
IDV refers to the Insured Declared Value of your car. You as a car owner must declare the IDV for your car while buying a Comprehensive Car Insurance Policy. It plays an important role in car insurance mainly because your car insurance premium depends on it. In an unfortunate event where your car gets severely damaged (i.e. damaged beyond repair), the insurance company will pay the amount as per the IDV of your car.
Other factors that affect car insurance premium
The premium for your car insurance policy does not solely depend upon the location of registration, there are a host of other factors involved. Here are some for your reference.
1. Car’s age
Car is deemed as a depreciating asset. Meaning its value decreases over time. Thus, the older your car gets, the less you spend on buying car insurance. This is the reason why the cost of insuring a brand new car is more than the value of insuring an older one.
2. Brand
The brand of the car matters while buying car insurance because the cost or the ex-showroom price of the car is different for different brands. Since the base value differs, the car insurance premium will also differ.
3. Type of car insurance plan
There are many car insurance plans available in the Indian market as each insurer creates plans with a mix and match of features. But if you narrow down the types of plans, they majorly offer two basic coverages – Third-party and Own damage.
Buying at least a Third-party Liability Plan is compulsory in India. And you can choose to buy the Own Damage cover if you want to claim damages to the car. The type of plan you choose will determine how much insurance premium you pay.
4. Number of add-on covers
Buying add-on coverages is completely optional. They add value to your car insurance policy and provide extra services or claim benefits depending upon the car insurance add-ons you choose.
5. Claim history
The number of claims you have raised in the previous policy period will determine the amount of No Claim Bonus (NCB) you receive and this affects the car insurance premium.
NCB is a discount you get on the premium of your Own Damage cover in case there are no claims in the previous policy year. This discount increases with each consecutive claim-free year.
6. Insured Declared Value
And of course the current market value of your car plays an important role in determining the premium. We have explained IDV in detail in the previous sections.
Can you save on car insurance premiums?
As mentioned earlier, you can save some money while buying your car insurance policy. Here are some tips.
- Renew the policy at least a week before expiry. This reduces the chances of lapse and helps you get continuous car insurance coverage.
- Select only the add-ons that are useful to you as it is easy to go overboard while selecting add-ons. Simply focus on what you need and ignore what you don’t.
- Compare car insurance quotes to find the cheapest plan but don’t compromise on coverage.
- Avoid major car modifications as your insurance premium would increase if you add them to your policy.
- Increase the security of the car by installing a certified anti-theft device. If you do so, your car insurance company might consider giving you a discount.
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