How to Calculate Car Insurance Premium?

Car Insurance Policy|How to Calculate Car Insurance Premium?

Car insurance is a vehicles insurance policy that covers a car and its owner against the unexpected damage that results in financial loss. A car insurance policy is a contract where the insurance company provides on-road coverage to the insured car against third-party liabilities and own damages.Car insurance, also known as vehicle insurance or motor insurance, provides financial protection to you & your four wheeler against any loss or damages resulting from accidents, theft, fire, calamities and third-party person or property. It also provides personal accident cover to the car’s owner-driver.

Types of Car Insurance Policy in India

Car insurance is a protection Guard for your car against any damages caused by natural Misery such as floods, earthquakes, cyclones, accidents, and thefts. There are three types of car insurance policies:

Third Party Car Insurance

Third-party car insurance provides coverage for third-party financial liabilities such as car damage, physical injury, death, disability as well as property damage.

Comprehensive Car Insurance

A comprehensive insurance policy provides coverage for third party liability as well as damages caused to your own car. In comparison with third party liability insurance, a comprehensive car insurance policy offers extensive coverage, more benefits & covers the damages caused to the insured car in case of an accident, collision, theft, etc.

Own Damage

Own damage policy provides coverage to the policyholder in case their car sustains any kind of damage. The third-party insurance does not cover your own damage so you have to purchase it separately.

Pay as You Drive Insurance

Pay As You Drive Insurance is also known as usage-based vehicle insurance. It allows a policyholder to pay the premium of the insurance according to the kilometers driven by the insured car. This will be useful for those who have multiple cars and hence do not use each of these very frequently. Currently, there are only a few insurers only who are offering this policy. It provides comprehensive coverage for own damage and third-party liability coverage is provided on a pilot basis for a term of a year.

How to Calculate Car Insurance Premium?

How to Calculate Car Insurance Premium?

Car insurance price is decided based on several factors. It is also easy to find out the four wheeler insurance premium using an online car insurance calculator. However, the insurance provider takes into consideration the following parameters before fixing the car insurance price:

IDV (Insured Declared Value) of the vehicle
Age and Type of Car
Engine’s Cubic Capacity
Geographical zone

Car’s IDV Calculation Formula:

IDV = Car’s Showroom price + Accessories cost – depreciation value

Thus, the formula to calculate OD premium amount is:

Own Damage premium calculation formula:

Insured Declared Value X [Car Premium as per the insurer)] + [ Optional Benefits] – [NCB/Discount etc.]

Also Read: Insurance Customer service

How To Compare Car Insurance Online?

Car insurance comparison is essential for choosing the best policy for your car. Compare car insurance online from top four-wheeler insurance companies before renewing. It takes a few minutes to buy or renew car insurance online. You have to enter the vehicle details, contact information, and insured details and choose the covers as per your need.

Buying a car insurance policy is mandatory in India for all cars as per the Motor Vehicles Act, 1988. Car insurance companies compensate for the loss or damage caused to the insured car and a third party from the insured four-wheeler. It can help to:

Car Make, Model and Variant

This information is critical to calculating the base premium. A luxurious, powerful and expensive car will attract more premiums. For e.g., an SUV car will always have a higher premium than a family car.

Year of Manufacture

The manufacture year of your car lets the insurance company assess its Insured Declared Value (IDV) that facilitates the underwriter to decide the annual premium for your car.

CNG Fitted Car

Being more vulnerable to combustion, a CNG fitted car is usually insured at a slightly higher premium than a plain petrol/diesel car.

Additional Covers

You need to mention whether you do or do not want to get a cover on electrical and non-electrical accessories fitted in your car. Most insurers provide a cover for your car accessories at an additional premium of 4% on its value.

Car insurance policy online:

1. Policy bazaar

2. bajajallianz


4. ICICI Lombard

5. Reliance General Insurance

6. TATA AIG Insurance