A car insurance policy is a compulsory requirement for car owners. That is why every car owner buys a car insurance policy. However, many don’t know how the premium is calculated for the policy. A car insurance calculator helps in these cases. The calculator helps in calculating the premium of the car insurance policy based on the details of the car.
For calculating the premium of a car insurance policy, some details are to be furnished in the calculator. These details are as follows:
The make, model and variant of the car determines the premium to be charged. Thus, the primary detail which is required for calculating the premium is the car details.
The year in which the car is registered is also required for calculating the Insured Declared Value (IDV). Calculation of the IDV is required for calculating the premium
If the car insurance policy is being renewed or a new policy is being affected for a used car, the existing insurance details of the car would be required.
The registration number is also required to identify the location where the policy would be bought. Premiums vary between different locations and so the location of the car is required to calculate the correct premium.
There are two types of car insurance plans, comprehensive and third party. Premium is different for the different types of plans. Hence, the type of policy required should also be provided in the calculator.
This is relevant if you are renewing an existing car insurance policy. Claim history determines whether there is any no claim bonus applicable or not. The discount is used to reduce the premium and is essential in premium calculation.
Though the calculator helps in calculating the premium of a car insurance policy, you should know the components of the premium. The premium of a car insurance policy is composed of three parts:
This premium is for the compulsory third party cover which is provided by the car insurance policy. This premium is fixed by the Insurance Regulatory and Development Authority of India (IRDAI) and is fixed for all insurers. The premium rate depends on the engine capacity of the car. IRDAI also reviews the premium rate every year and makes changes if required.
In case of comprehensive car insurance policies, damages suffered by the car are also covered. This coverage is called own damage cover and a premium is charged for this cover. The premium rate depends on the Insured Declared Value (IDV) of the car and varies across different policies.
Many car insurance policies, both comprehensive and third party, offer an inbuilt personal accident cover. This cover pays a benefit in case of accidental death and total and permanent disablement. For this cover also, an additional premium is charged.
Thus, a car insurance policy’s premium is a combination of third party premium, own damage premium and premium for personal accident cover
The premium of a car insurance policy depends on a lot of factors, many of which are used in the car insurance calculator too. The factors affecting the premium rate of car insurance plans are as follows:
As stated earlier too, the car’s make, model and variant affects the premium. This is because the car’s specifications determine the value of the car and the value of the car determines the premium charged.
Engine capacity determines the third party premium which is a component of premium calculation. Higher the engine capacity higher would be the car insurance premium.
A car insurance policy can be comprehensive or liability only. Comprehensive plans are more expensive than liability only plans because they have own damage premium component too.
If you modify the car and install safety devices, the risk of mishaps reduces. This risk lowers the probability of claims too. As such, cars with safety devices have lower premium rates because a premium discount is allowed for installation of such devices.
The age of the car affects its Insured Declared Value (IDV). IDV, on the other hand, determines the premium. As the car ages, the IDV falls and so does the premium rate. So, premiums for older cars are cheaper than premiums for newer ones.
A car insurance policy allows various types of discounts. You get a discount if you install safety devices, don’t make a claim in the policy year, opt for voluntary excess, buy the policy online or become a member of a recognised automobile association. These discounts help in lowering the premium charged by the plan.
The location at which the car is registered also makes a difference in the car insurance premium. Premiums for metro cities are higher compared to premiums for non-metro ones.
A comprehensive car insurance policy allows optional add-ons which help in increasing the scope of coverage. Each add-on, however, requires the payment of an additional premium. Thus, if an add-on is selected in the policy, the premium increases.
A car insurance calculator helps in estimating the premium payable for the car insurance plan. It also lists the available plans with their respective premium rates. This helps you in finding the best plan within your budget. Other advantages of the calculator include the following:
The discount rate varies across different insurance policies. However, you can earn a discount of up to 60% in your car insurance premium using no claim discount and other available discounts.
Yes, if the car is modified, the value of the car increases or reduces. Any increase or decrease in the car’s value has a direct impact on the car insurance premium.
A comprehensive policy is costlier as it covers third party liability, own damage and personal accident cover. Thus, all components of the premium are included in a comprehensive policy which makes the premium costlier.
The personal accident cover, which is inbuilt in the policy, covers the owner or driver of the car. For covering passengers, a separate add-on should be taken.
Yes, the fuel type of the car also affects the premium rate. Diesel cars are more expensive than petrol variants and so the premiums for diesel cars are higher than premiums of petrol ones.
Yes, you can calculate the premium of a used car too using a car insurance calculator.
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