car insurance choosing factors

Ever wondered if you can save on car insurance premiums? Or how car insurance calculator works?

Owning a car is one thing and protecting it is another. Car insurance is the way you ensure to stay financially protected.

Make the most of your car insurance policy when you understand how policy premium is calculated. And the factors considered into while calculating the premium.

There are two types of car insurance policy, third-party and comprehensive or package policy.

The third-party policy covers only third-party liability cover and does not cover any own damages.

The other is a comprehensive policy which covers both the third-party and own damages. With a comprehensive policy, you stay covered for any damage that may happen to your car.

A comprehensive plan offers complete protection against damages to your vehicle due to accident/collision, theft, and third party liability cover.

The IRDA decides the premium for the third-party by the car’s engine cc.

While the comprehensive plan consider number of variables to calculate the premium like

  1. Own Damage Premium
  2. Third-party Premium
  3. Personal Accident Cover
  4. Add-on covers
  5. Discounts

Final Premium = Own Damage Premium + Third-party Premium + Optional Add-on cover charges (if any) + Personal Accident cover (owner-driver) + Optional Passenger cover + Optional paid-driver cover – (No Claim Bonus + Other Discounts, if any)

  1. Own Damage Premium:

Own damage cover is not mandatory. However, it provides the financial protection in case of damages incurred to your car due to any of these following:

  1. Natural Calamities (Like Earthquake, storm, fire, etc.)
  2. Man Made Calamities (Riot, Strike, Malicious Damage, Terror Attacks, etc.)
  3. Accidents, etc.
  4. Loss of vehicle due to theft

The insurance company decides the premium.

Factors that are determined while calculating Car Insurance Premium are:

  1. Insured Declared Value (IDV) which is calculated based on vehicle ex-showroom price, age, etc.
  2. Location of Registration
  3. Engine Cubic Capacity (cc)
  4. No Claim Bonus
  5. A) Insured Declared Value (IDV)

IDV is the maximum amount that the insurance company will pay in case of any loss or damage to the insured vehicle. This value is payable at the time of claim and if the claim is approved due to the pertinent mentioned in the policy wordings during the policy period.

This value is based on the ex-showroom price of the vehicle and vehicle age. It indicates the current market value of your car. The IDV reduces with the age of the vehicle.

Vehicle Age IDV Percentage
NEW (0 to 6 Months) 95% of Ex-showroom
6 Months to 1 Year 85%
1 Year to 2 Years 80%
2 Years to 3 Years 70%
3 Years to 4 Years 60%
4 Years to 5 Years 50%

The IDV for vehicles aged over 5yrs is calculated as per the agreement between the insured and the insurer. Different insurers may offer different IDV for the same vehicle.

  1. B) Location of Registration

Based on the location of registration the premium differs. The location of registration is categorized either under the Zone A or the Zone B.

Zone A: Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad

Zone B: Rest of India;

Depending on the Zone the premium is calculated.

  1. C) Engine Cubic Capacity:

Based on the engine cubic capacity (cc), the third-party premium is calculated. Higher the cubic capacity, higher is the premium.

  1. D) No Claim Bonus:

No Claim Bonus is a discount on the premium. The policyholder can avail this discount based on the number of claim-free years.

  1. Third-party premium:

The third-party premium is based on the vehicle engine cubic capacity. It is decided by IRDA which changes every year.

The following table shows the premium charges as on 1st April’17.

Engine cc Premium (Rs.)
Not exceeding 1000cc 2,055
Exceeding 1000cc but not exceeding 1500cc 2,863
Exceeding 1500cc 7,890
  1. Personal Accident Cover:


  1. For Owner Driver:

This cover is for the owner-driver providing financial aid in case of an accidental damage and permanent total disability. It provides a sum insured of Rs.2 lakh for the owner driver, passenger on the premium of Rs.100 p.a.

  1. Optional Personal Accidental Cover:
  • Passenger Cover: Rs.100 per person for a sum insured of Rs.2 lakh.
  • Legal liability for Paid driver: Rs.50


  1. Add-on covers:

These add-on covers are the optional paid features. This may increase your premiums. However, can be super saver at the time of claim.

Most standard add-on covers available:

  • Zero Depreciation Cover or Bumper to Bumper Cover
  • Accessories Cover
  • No Claim Bonus Protection
  • Roadside Assistance & Towing Rider
  • Engine Protection Cover
  • Medical Expenses & Accidental Benefit Rider
  • Return to Invoice cover
  • Consumables Cover
  1. Discounts:
  • Anti-Theft Devices: If the owner of the insured vehicle installs an anti-theft device will get 2.5% discount or maximum up to Rs.500 on the premium.
  • Member of Auto Association: if the policyholder is the member of the Association will get 5% discount or up to the maximum of Rs.200.
  • Voluntary Discounts: Discounts given for opting extra deductible over and above compulsory deductibles. The discount may vary from 20% to 35% depending on the voluntary amount chosen.

After considering all the factors, the policyholder gets the final premium. These factors are the backbone of the car insurance calculator.

Recommended Read:

How to Get Cheaper Car Insurance Quotes? 

How to Claim Third Party Insurance


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