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How Is Premium For Car Insurance Policy Calculated?


Written by Amit Jain

Updated Oct 18, 2023

How Is Premium For Car Insurance Policy Calculated?

Getting your first automobile is a big deal. Despite all of its benefits, cars are not cheap. The more deluxe the vehicle, the more expensive it is. As a result, buying an automobile is difficult. However, clients who want to buy a car have access to a variety of financing solutions.

The next significant purchase after buying a car is a car insurance plan. It's crucial for clients to have a safety net in times of economic uncertainty. Car insurance policies come in two different varieties - Third party liability, and comprehensive coverage. Third-party liability insurance is compulsory and pertains to the protection offered when an insured damages another person's car. Under comprehensive coverage, the policyholder's car is offered protection. To know more about premium calculation for car insurance policy, read on.

How Is Premium For Car Insurance Policy Calculated?

How Is The Premium For Car Insurance Calculated?

With the aid of the car insurance premium calculator, anyone can easily determine their premium. The cost of a vehicle insurance policy is determined by the plan's protection as well as additional elements like the make, model, etc., of the automobile. The cost of independent own-damage and comprehensive car insurance plans is set by the insurance providers and they vary from policyholder to policyholder, while the cost of third party car insurance plans is set by the IRDA and solely depends on the engine power of the respective vehicle.

What Are The Advantages Of Calculating Car Insurance Premium?

There are several advantages to having a rough idea of the auto insurance premium that can be charged. Following are the advantages of calculating car insurance premium -

  • Customers who are aware of the premium they will have to pay may plan their finances accordingly. So, they won't end up in a tight spot.
  • Customers may examine several choices and select the one that suits their needs.
  • It will be much simpler to organise everything overall.

What Are The Factors That Affect The Premium For Car Insurance?

The premium amount that clients must pay is influenced by a wide range of variables. Following are the factors that affect the premium for car insurance -

  • IDV - Also known as the maximum amount a client may claim for the vehicle.
  • Automobile age and kind - The more the premium that must be paid, the older the car. This is so because vehicles are assets that depreciate over time and lose value. Expensive vehicles with unique upgrades will also command a greater price.
  • Car engine - The greater the engine or cubic capacity, the higher the premium that must be paid.
  • Topography - The geographic region from where the automobile is acquired will also affect the premium sum.
  • Costs - Higher premium payments will indeed occur from additional equipment that were not included in the vehicle at the time of purchase. The amount of the premium is also influenced by no claim incentives and anti-theft reductions.

How Can A Person Reduce Car Insurance Premiums?

Following are some factors through which an individual can reduce premiums -

  • Limiting Minor Claims - The quickest strategy to reduce your insurance price is to accumulate NCB by going a whole policy year without filing a claim. You shouldn't file claims for minor losses and pay for them out of your own money to make this happen. Additionally, you must drive safely to prevent any collisions.
  • Purchasing Online Car Insurance - One may notice significant differences when comparing online insurance purchases to offline plan purchases. Comparing insurance quotes online can make it simple for policyholders to locate an inexpensive coverage. Due to the cut down on agents and other intermediaries, insurance firms also provide policies online at low pricing.


Due to the high cost of buying a car, clients should insure their vehicle for safety and to avoid additional headaches if the vehicle is damaged. By checking that their IDV is accurate and purchasing a car that truly meets their needs, customers may lower the amount of their premium payment. It's also a good idea to look into several possibilities before committing to a certain insurance plan.

Also read: What Is HDFC Car Ergo Plan?

Which is Better: Acko Or Hdfc Ergo?


Written by Amit Jain

Amit is an upcoming name in the motor industry be it new cars/ bikes or used ones. Amit in his last stint worked as a consultant for major Fortune 500 companies across the globe.&Read More


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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