How To Calculate Car Insurance Premium?


10 March,2023


01 April,2024

how is car insurance premium calculated

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    In India, car insurance is mandatory according to Section 146 of the Indian Motor Vehicles Act of 1988. An affordable four-wheeler insurance premium is one of the primary factors to choose the right four-wheeler insurance policy. Four-wheeler insurance calculators help estimate the price of insurance premiums for car owners and those looking to purchase a car. Let us explore the factors that affect the car insurance premium, online premium calculation process and smart ways to save on your four-wheeler insurance premium in detail.


    Everyone looks for a good four-wheeler insurance policy that fits their needs and wants. Using an online vehicle insurance premium calculator to choose the best possible coverage is crucial for making an informed decision.


    How Car Insurance Premium is Calculated

    To calculate the premium of the car on insured declared value, three factors are considered: age, vehicle type, and engine capacity. Let us look at how to calculate four-wheeler insurance.


     1. Third-Party Liability Premium 

    It is based on the car’s cubic capacity (cc), as well as the regulations defined by the Insurance Regulatory Authority of India (IRDAI).


    2. Own Damage Premium

    If damage occurs in line with the Own Damage clause, the insurance premium will be based on the Insured Declared Value (IDV). The higher the insured declared value the higher will be the premium. As time passes by, the car will get older and the insured declared value will also decrease.


    3. Insured Declared Value Estimated

    Insured Declared Value = Car price at showroom + accessories cost – value of depreciation of car.


    4. Personal Accident Cover Premium

    This insurance cover provides financial compensation in the event of accidents and unexpected incidents that lead to disability or, regrettably, death for the insured individual. This means that if the insured experiences a disability due to an accident or in the unfortunate event of their passing, the insurance cover would support them and their loved ones during such challenging times.


    5. Add-ons

    The add-ons enhance the financial protection for your vehicle at a minimal cost, empowering the policyholder to customise the coverage to suit specific needs. Each add-on serves a distinct purpose, effectively enriching the overall protection. It's essential to note that these extra coverages are optional, providing the flexibility for policyholders to tailor their insurance according to their individual requirements and preferences.


    Car Insurance Premium Calculation Formula 

    Understanding how insurance is calculated for a new car is essential for making informed decisions. Let us delve into the specific calculations involved in determining your car insurance premium.


    1. Third-Party Liability Premium: This component is influenced by the car's cubic capacity and requires car owners to follow certain guidelines.


    2. Own Damage Premium: It is calculated based on the Insured Declared Value (IDV), which represents the car's showroom price, accessories cost, and depreciation.


    Suppose your car's showroom price is ₹800,000, accessories cost ₹20,000, and the depreciation value is ₹150,000.


    IDV = INR 800,000 + INR 20,000 - INR 150,000 = INR 670,000 

    With an insurer's fixed premium rate and add-ons, the premium amount is determined as follows:


    Premium Amount = INR 670,000 x [premium rate + add-on]


    3. Personal Accident Cover Premium: This cover provides for accidents and disabilities, and the premium may increase with higher sums assured.


    Understanding the intricacies of these calculations allows policyholders to assess the components contributing to their premium, ensuring transparency and informed decision-making in selecting the right coverage. By unravelling the specifics of the insurance calculation formula, you gain insights into the financial aspects of your car insurance, making the process more accessible and transparent.


    Factors that Affect the Price of Car Insurance  

    Here are some important things that affect the price of four-wheeler insurance premium are:;


    1. Location Based

    The place where the insured car will be driven most often is also taken into account when deciding the premium. For example, areas with a lot of traffic, like cities, will have higher premiums than rural areas or places with less traffic and less risk.


    2. Insured Declared Value (IDV) 

    In the event of a total loss or theft, the Insured Declared Value is the highest amount an insurance company will pay out to the insured. The IDV relies on factors like the brand, manufacturer's selling price, model of the car, RTO details and so on.


    3. Cubic Capacity 

    The cubic capacity of the vehicle also influences the car insurance premium. A four-wheeler insurance premium is also affected by the car's make, model and type.


    4. Year of Manufacture  

    Old cars will have low IDV values due to the depreciation factor, which means that their insurance premiums will be less than those for newer cars, whose IDV values are higher.


    5. No Claim Bonus (NCB);

    When no claims were made over the duration of the specified policy, the insured can get the advantage of the No Claim Bonus during their policy renewal. It is advisable to renew your four-wheeler insurance policy on time to avoid losing NCB.


    How to Save on Your Shriram Car Insurance Premium

    1. Renew your insurance on time 

    When an insured missed their four-wheeler insurance policy renewal, No Claim Bonus resets to zero. It means that the accumulated No Claim Bonus expires as a consequence of not renewing the Comprehensive Plan within 90 days of the policy's expiration date, and your NCB will be reset to zero. Renewing your four-wheeler insurance on time can help you save money. 


    2. Anti-theft devices - ARAI 

    Anti-theft devices that have been authorised by the Automotive Research Association of India (ARAI) can benefit an individual to get a competitive premium.


    Wrapping Up

    A wide range of factors influences the cost of a four-wheeler insurance policy. An individual can get an online quote for Shriram Car Insurance on the go by giving a few necessary information about their vehicle.


    Shriram Car Insurance provides comprehensive coverage and all-around protection for your car. The coverage can pay for covered damages or losses caused by a variety of incidents. Additional coverage can be added to the insurance policy to give greater protection for the vehicle.


    Key Highlights

    • A car insurance calculator and the right insurance calculator formula assists car owners and people who want to buy cars figure out how much their insurance premiums will be when they purchase the right policy online.
    • The cubic capacity of the vehicle also influences the car insurance premium. A car's insurance premium is also affected by the car's make, model, and type.
    • Bumper-to-bumper four-wheeler insurance, also known as zero depreciation insurance, covers all rubber, fiber, and metal parts of your car without considering the depreciation value.
    • Shriram Car Insurance provides comprehensive coverage and all-around protection for your car.


    1. How much does car insurance cost in India?

    Four-wheeler insurance premiums differ based on the type of coverage you decide. Your premium will be calculated by an insurance provider depending on your vehicle’s age, location, the kind of coverage you need (e.g., third-party or own damage)


    2. What is IDV in car insurance?

    In car insurance, the IDV (Insured Declared Value) is the current market value of your vehicle. IDV also assists us in determining the appropriate premium price for your four-wheeler insurance.


    3. What is bumper-to-bumper insurance?

    Bumper-to-bumper four-wheeler insurance, also known as Nil Depreciation Cover, covers all rubber, fibre, and metal parts of your car without considering the depreciation value.


    4. What factors influence insurance premium calculation?

    Key factors include the vehicle's make, model, fuel type, location, and the driver's history. The Insured Declared Value (IDV), cubic capacity, and year of manufacture also play vital roles in determining the final insurance premium.


    5.How can one save on insurance for a new car? 

    Timely renewal preserves the No Claim Bonus (NCB), reducing premiums. Installing authorised anti-theft devices, and selecting relevant riders can also secure competitive premiums for comprehensive coverage. 

    Save up-to the 85% off on your car Insurance

    Save up-to 85% off on your Car Insurance

    Save up-to the 85% off on your car Insurance

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