How Own Damage Premium is Calculated ?

What is Own Damage Insurance?

Own Damage Insurance is a component of a comprehensive Car Insurance policy. It covers the cost of repairing or replacing your own vehicle in the event of:

 

• Accidental damage caused by collisions or overturning

• Fire, explosions, lightning

• Natural disasters like floods, earthquakes, landslides, and cyclones

• Theft or burglary

• Damage during transit (road, rail, air, or water)
   

This is distinct from:

• Third-Party Liability Insurance, which covers injury, death, or damage to another person or their property.

• Add-ons, which are optional features such as Zero Depreciation, Return to Invoice, and Roadside Assistance.

 

Simply put, Own Damage Insurance safeguards your investment by protecting against damage to your car. In contrast, Third-Party Insurance covers against loss or damage caused to others in an accident.

 

How is OD premium calculated?

Key factors in OD premium calculation

The Own Damage Insurance premium is not a flat rate. It depends on several dynamic variables:
 

• Insured Declared Value (IDV): IDV is your car's estimated current market value. It serves as the foundation for the OD premium and reduces with age and depreciation.

• The vehicle's age: In general, older cars have lower IDVs, which means their premiums are cheaper.

• Model, make, and variant: The manufacturer and the particular variant of the car have an impact on premiums. Due to their greater IDV, luxury automobiles and premium SUVs usually have higher premiums than typical sedans or hatchbacks.

• Engine capacity (cc): Due to higher risk and repair expenses, vehicles with bigger engines have higher OD premiums.

• Location zone: India is classified into two zones:

  • Zone A: Metropolitan regions like Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Ahmedabad, and Pune are all included in Zone A. These places have higher premiums owing to busy traffic, greater accident rates, and an increased risk of theft.

  • Zone B: All other towns, cities, and rural areas are included in Zone B. These regions usually have cheaper Own Damage Insurance premiums for vehicles registered there.

• No Claim Bonus (NCB): A reward for claim-free years. Starting at 20%, NCB can increase to a 50% discount over five years without a claim. It lowers your Own Damage premium substantially.

• Add-on covers: Engine Protection Cover, Key Replacement Cover, and Zero Depreciation Cover are some of the add-on covers that give you additional protection. They boost your coverage and are purchased by paying extra.

• Voluntary deductibles and anti-theft devices: Discounts on the Own Damage Insurance premium can be gained through installing ARAI-approved anti-theft equipment or opting for a higher voluntary deductible.

• History of prior claims: A history of submitting multiple claims might impact your NCB or raise your premium.

 

The Car Insurance Premium Formula

The Car Insurance premium formula for calculating Own Damage premium is:
 

Own Damage Premium = (IDV × Premium Rate) + Cost of Add-ons – (NCB + Applicable Discounts)
 

Here’s an example:

• IDV: ₹6,00,000

• Premium rate: 2%

• Add-ons: ₹4,000

• No Claim Bonus: 20%

• Other discounts: ₹1,000

 

Calculation:

• Basic premium = ₹6,00,000 × 0.02 = ₹12,000

• Add-ons = ₹4,000

• NCB = ₹2,200

• Discounts = ₹1,000

• Total OD premium = ₹12,000 + ₹4,000 – ₹3,200 = ₹12,800

 

Different insurers may use slightly different internal formulas, but the structure remains consistent and is regulated by the IRDAI. If you want a real-time estimate, check out Shriram Car Insurance's online premium calculator, which provides an estimate.

 

Why this matters?

Knowing what you're paying for is more important than just comparing premiums when purchasing car insurance. Understanding Own Damage premium calculation enables you to evaluate your insurance more thoroughly, take advantage of any discounts, and choose the coverage that suits your requirements. You can:
 

• Avoid overpaying for unnecessary add-ons.

• Adjust your IDV to reflect your needs.

• Use your No Claim Bonus effectively.

• Choose suitable deductibles and security features.

• It also helps you compare policies more accurately, beyond just the headline premium.

 

Choosing the right insurer

If you're evaluating insurance providers, Shriram Car Insurance provides competitively priced Own Damage covers, with customisable plans, a user-friendly claims process, and nationwide garage networks. Plus, with add-ons like Zero Depreciation, Personal Belongings Cover, and more, you can ensure your vehicle gets the most comprehensive coverage possible. For those who seek value without compromising on protection, explore our plans today.

 

FAQs

1. Is Own Damage Insurance mandatory in India?

No, it's not mandatory. According to the Indian Motor Vehicles Act, Third-Party Insurance is mandatory. However, Comprehensive Insurance is recommended for complete protection.

 

2. How often is IDV updated?

Every time a policy is renewed, the IDV is updated to account for the vehicle's value decline.

 

3. What if I miss renewing on time?

In addition to having to go through a car inspection before renewal, you risk losing your NCB. It's best to renew before it expires.

 

4. Are electric vehicles covered under OD insurance?

Yes. Insurers provide OD insurance for electric cars. However, premiums may differ depending on the battery's type and price.