Analysis of Car Insurance Premium

Due to the number of variables that have a high impact on the car insurance premium, it becomes

one of the most complicated insurance policies to buy. Over the years, car insurance companies

have started to introduce easy-to-navigate platforms for online car insurance for users so that they

can compare the motor insurances and then make the choice. So, let’s have a look at what really

makes care insurance premium.

The three main components of car insurance premium are as follows:

1. Third Party Claim

2. Own Damage Claim

3. Accidental Cover


Now let us delve deeper into the factors of car insurance premium.


1. Location: India has been divided into 8 metros and the rest of the cities according to the

Motor Insurance Act. The premium asked for the 8 metros is comparatively higher when

compared to the rest of the country. In cities like New Delhi, Mumbai, Bengaluru, Kolkata,

Hyderabad, Chennai, Pune and Ahmedabad, the risk factor is more. So normally, the

premium is calculated on the basis of these locations. Though, there are few car insurance

companies that charge more premium is your vehicle is registered in say Punjab or Delhi

where the chances of accident or theft are more.


2. Engine CC: The third party component of the car insurance is more for vehicles which

have higher engine displacement (CC). The classification thus is as follows:

i) Rs 670 for >1000cc

ii) Rs 800 for 1000 to 1500 cc

iii) Rs 2500 for more than 1500 cc


3. Car’s Age: Depreciation in accordance to the age of the vehicle also plays an important part

in framing the car insurance premium. The depreciation value reduces with the increase in

the age of the car and along with it, the own damage component of the car insurance also



4. No Claim Bonus: Policy holders who have no claims or lesser claims are rewarded by the

car insurance companies. In fact, up to 50% of rebate is offered by the car insurance

companies if there has been no claim in the past. The rebate is endowed on the own damage

component of the car insurance.


5. Car’s manufacturer: The car insurance companies keep a flawless track over the kind of

claims which might be higher for one car’s manufacturer or model in comparison to the

other car manufacturer/model. So premium also depends on this fluctuating ratio. For

example, the premium which you have to pay, say for Mahindra Scorpio would be higher

than that charged for Honda City or Maruti.


6. Profession: Sometimes, 5% discount is offered for car owners who are in Central

Government jobs. At the same time, the age of the driver/owner also plays an important

part in deciding the premium for the car insurance policy.


Keeping all these facts in mind, always compare the care premiums offered by the different car

insurance companies with strict scrutiny. The comparative analysis of car insurance companies is

indeed a must in order to avoid later hassles.


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