How To Calculate Motor Insurance Premium online?

How to Calculate Insurance Premium for Car?

To know how insurance companies calculate your car premiums, check out this simple formula.

Car Insurance Premium = Own Damage Premium - (No claim bonus + Discounts) + Third Party Liability Premium that is fixed by the Insurance Regulatory and Development Authority of India (IRDAI).

Third-Party Liability Premium Rates

Here are the third-party car insurance premium rates for a 1-year policy, effective from June 1, 2022, as set by the IRDAI:

Factors that Affect Car Insurance Premium

The premium of car insurance is determined by the following factors:

1. IDV (Insured Declared Value) of the vehicle

The IDV is the car's current market value used to set the maximum amount that an insurer will pay in case of loss or theft. Usually, a higher IDV means a higher premium, as you would have a larger insurance coverage amount. However, a low IDV will reduce your premium but can also leave you underinsured.

2. Type and age of the vehicle

The type of car, whether sedan, SUV, EV, or hatchback, also affects your premium since different types have different repair and replacement costs. The age of the vehicle is also important as a new car will often cost high premiums because of its higher market value, while an older car might cost lower premiums as it depreciates in value over time.

3. Cubic Capacity and KiloWatt of the engine

The CC and KW of an engine indicates its size and power. A higher CC and KW means the engine is bigger and more powerful. Cars with bigger engines are seen as riskier, so their insurance premiums are usually higher. Smaller engines often result in lower premiums.

4. Geographical zone

Where you live and drive your car affects the cost of insurance. If you live in a place with a lot of traffic, more accidents, or more thefts, your insurance premium will likely be higher. But if you live in a quieter area with less traffic and fewer risks, your premium could be lower.

Details Needed to Calculate Insurance Premium for Car

Following are the details that you may need to have while you calculate the insurance premium online:

• Manufacturer
• Car Model
• Car Variant
• Fuel Type
• RTO
• Car Registration Year
• Previous policy details (if any)
• Claim Details
• No Claim Bonus Discount

How to Lower Your Car Insurance Premium?

The cost of car insurance depends on factors like the coverage you choose, the car's value (IDV), add-ons, and the car's make and model. Here are some simple ways to reduce your car insurance premium:

• Avoid Small Claims: If you don't file claims for minor damages, you can keep your No Claim Bonus (NCB). This bonus can give you a discount of 20% to 50% on your renewal premium, saving you money in the long run.
• Renew Your Policy on Time: Always renew your insurance policy before it expires. If you miss the renewal deadline and the grace period, your policy could be canceled, leading to higher costs when you buy a new one.
• Avoid Modifying Your Car: Modifying your car with new features like alloy wheels or upgraded sound systems can increase your insurance premium. To keep your premium low, it's better to avoid making these changes.
• Buy Insurance Online: Purchasing your car insurance online can be more affordable. You can compare different policies, use a car insurance calculator to find the best deal, and avoid paying extra fees to agents.

How to Calculate Car Insurance Premiums for New and Old Cars

The insurance premium for a new and old car depends on the type of plan you choose. If you go for a comprehensive policy, your premium will include two parts: third-party premium and own damage premium. The third-party premium is set by the IRDAI for all cars. The own damage premium is calculated using this formula:

Own Damage Premium for a New/Old Car = Insured Declared Value (IDV) of the car × insurer's premium rate + add-on covers - discounts - NCB* (*if any)

Conclusion

Calculating car insurance is not that difficult. Once you understand what affects the cost and all the required details, it's easy to calculate your premium. Just consider the coverage you want, your car's IDV, any add-ons, and your No-Claim Bonus. This will help you choose the right insurance policy that gives you the protection you need at a price you can afford.