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In India, when you buy a new car, you must almost immediately buy a car insurance policy. Driving without a valid insurance cover is not an option as it is a mandatory requirement by law. As per Indian Motor Vehicles Act, all car owners must compulsorily have at least a third-party car insurance. Apart from being on the right side of the law, a car insurance policy is necessary to get financial protection against the accident-related damages or losses.

Today, buying a car insurance policy is easy, but paying the premium for such a policy can dent your finances. So, when you buy four-wheeler insurance, you must assess the factors that affect the premium and decide how you can minimise these expenses.

Typically, the insurance companies determine the premium for the policy based on the risks that they must cover. The risk factors that they cover and affect the car insurance premium are discussed below.

Vehicular risks

Many factors like the model of the car, manufacturing year, and the cubic capacity of the vehicle’s engine play an important role in determining the premium of your car insurance policy. Generally, the insurers charge a higher premium for SUVs (Sports Utility Vehicles), and luxury automobiles than ordinary cars because the Insured Declared Value is higher for these cars. Insured Declared Value is the amount that is decided at the beginning of policy purchase. This is the maximum amount the car owner receives in case of theft or total loss of the vehicle. IDV is determined basis the showroom value of the car minus the depreciation. For vehicles that are older than 5 years, the insurance companies compute the IDV based on its current market value and determine the premium accordingly.

Additionally, the vehicles that run on diesel attract higher premiums than cars that run on petrol.

So, when purchasing a new car, be careful about the type of car you buy, as it may have a significant impact on the premium. Apart from choosing the car wisely, you must determine the IDV (insured declared value) of the car as it affects the premium.

Claim history

Typically, insurance companies charge a higher premium for vehicles that have been involved in an accident. In addition, if you make a claim during the policy year, you may have to pay a higher premium when you renew the same.

Diver related risks

The insurance companies consider the driver’s age, profession, etc., while calculating the premium. Also, if you have a bad driving history or you have been booked for violating traffic norms, you may have to pay a higher premium than others.

Also, if you want to cover more than one driver under the same policy, your premium will increase proportionately.

Location risk

The location where you register the vehicle has a direct impact on the car insurance premium. Typically, cars registered in urban areas attract higher premiums than in smaller towns. Similarly, if you live near a highway or in a densely populated place, you may have to pay a higher premium than others. Finally, if your area has a history of theft or vandalism, then be ready to pay a higher premium on car insurance.

Final Word

Now that you are aware of the various risk factors that affect your car insurance premium, you can make an informed buying decision. If you are looking for a new car insurance, or want to switch your plan, you can check our comprehensive car insurance policy Kotak Car Secure. You can visit our Kotak General Car insurance page to know more about the policy and buy the policy.

Disclaimer: The content provided is for education and informational purpose only, none of the information contained in our blog amounts to any form of opinion or advice. Please go through policy related documents carefully or consult an expert before making any insurance-related decisions.


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