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Factors that affect Car Insurance Premiums

Written by Sharad Bajaj
Updated On Oct 13, 20232 min read

Did you know there were multiple factors which affect your car premium? Check the list below

Most people disregard car insurance as an unnecessary expense. Many policyholders either opt for a low coverage amount or a higher deductible amount to reduce the premium rates of their car insurance plans. This is because most of them are unaware of factors that affect their car insurance premiums. However, there are many factors that affect car insurance premium rates. Some of them include:

Make and model of your car: The make and model of your car has a determining effect on the car insurance prices that you are charged. In addition, car insurance companies check for the fuel type of your car. This is because the premiums for petrol, diesel and CNG cars are different. Owners driving diesel cars have to pay more premiums than those that run on petrol or CNG.

The safety rating of your car: Some high-end cars come with a higher safety rating, which means that they are less prone to damage during accidents. This explains why the insurance premium rates on such cars are always low.

Car registration location: Your place of residence may be prone to car thefts or severe damages due to accidents. Low-traffic areas in remote cities are less accident-prone than the densely populated metropolitan cities where chances of accidents are more. Apart from this, car repair is costlier in cities than in remote towns and villages. Insurance companies inquire about the city where your car has been registered and decide premium rates accordingly.

Car engine’s cubic capacity: This factor comes into play when you are opting for a comprehensive car insurance policy. The third-party insurance premium is decided on the basis of the car’s engine capacity. Higher the engine capacity of the car, the greater the insurance premium rates.

Age, gender and marital status: Customer’s age matters. This explains why customers in the age group 18-25 years have to pay higher premiums while their older counterparts, especially, those aged above 50 years are charged lower premium rates. Similarly, women are deemed to have better driving acumen than men and, hence, are asked to pay lesser amounts of premiums. Married people are believed to drive more safely than single and are charged less by car insurance companies in India.

Nature of coverage: Your car insurance premium rates also depend on the kind of coverage you have opted for. Those opting for a third-party policy have to pay less while customers who choose comprehensive coverage policies and their corresponding benefits have to spend more on premiums.

Installation of anti-theft devices: Security systems or anti-theft devices installed in the vehicle lessens the chances of vehicle theft. This, in turn, lowers the risk on the part of the car insurance companies to pay claims in the event of sudden theft or damage. To further avail the benefits of saving money on car insurance premiums, you must install anti-theft devices approved by the Automotive Research Association of India (ARAI).

While shopping for car insurance, you must exercise prudence similar to while making any financial investment. Though it is mandatory to buy a car insurance policy, understanding simple and necessary factors governing car insurance premiums goes a long way in saving a lot of money on the premium amounts.


This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
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Written by Sharad Bajaj
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 Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. He helped set up and scale the motor insurance vertical for a leading insurance company in his previous stint. In his spare time, Sharad likes to read and be in tune with nature.

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