How to Calculate Car Insurance Premium

a car and a red pen is on a calculator. cost of gasoline, wear and insurance. car costs are not paid by commuter tax.

Car insurance is one of the mandatory documents to have in India. Once you buy a car, it compulsory to get its insurance done. As per legal requirements it is required to always keep the insurance handy whenever you are on the road in a car. Most of the car insurance policies are valid for one year. After a year, you will have to renew the car insurance policy and the new premium is decided on the basis of factors like depreciation, NCB, and applicable taxes.

These days most of the companies also have a car insurance premium calculator available on their portal. They would ask you to fill up the details like car brand name, model of the car, the year of the manufacture, and registration date etc and calculate your premium.

Calculation of Car Insurance Premium

The calculation of premium is done mostly by this simple formula:

Premium = Own Damage Premium – (No claim bonus + discounts) + Liability Premium (minimum statutory premium to be paid as Fixed by the IRDA)

Car insurance premium is calculated based on the following factors:

  • OD Premium or Own Damage Premium: This is the premium charged by the insurance company to in sure the client’s four wheeler against the damages of accident, fire, theft, etc.
  • IDV or Insured Declared Value: This is value of the car that comes after deducting the depreciation percentage. Or,IDV = Ex-showroom price of the car + cost of accessories (in case it has) – depreciation value. The depreciation can be anywhere between 5% to 50% as per the age of the vehicle.This is the final figure of the four wheeler on which your policies will be decided. This value will be used in the case of complete loss of the vehicle affirmed by the keen evaluation of the car. In other words, IDV is the maximum amount that you can claim for from the insurance company.
  • Third party amount: This is the premium against the claims from the third party. This premium is recommended by the IRDA per year basis.
  •   Zero Dep: This is the premium charged under the zero dep add-ons.
  •    CC of the Vehicle: The premium also depends on the Cubic capacity or the engine power of your More the CC, more is the premium.
  • No Claim Bonus or NCB: One of the prime factors deciding the car insurance premium, the client may get NCB discount if he has not made any claim in the previous year. If the client has NCB component in his policy, he can save a huge sum on the Own Damage (OD) premium.
  • Other factors: Other factors like age and gender of the client is also sometimes considered while deciding the premium of the car insurance. If the individual is less than 25 years of age, he is likely to have more accidents and hence may be asked to pay more premium. Luxury cars like BMW and Merc have a higher insurance premium as compared to the mid-range category of cars because the parts of the luxury cars come with a higher price. For the same reasons, SUV premium will be higher than the sedan or hatchback four wheelers. Even the price of the premium is higher in the higher density areas as the chances of accidents there is more. A CNG fitted car will have a higher amount as compared to the petrol or diesel variant.

If you have these factors in mind, you’d be able to understand why you have to pay a certain amount on car insurance premium. Your money needs to be justified when being spent. Car insurance calculator will help you do just that.