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Why Does My Car Insurance Premium Change Every Year?

Published On Nov 06, 2020

Ever wondered why your car insurance premium changes every year. In this article, we will tell you everything you need to know about it.

Cars have become an essential part of our lives and are also some of the most major purchases that we make in our lives. Hence, it is always prudent to purchase car insurance. A third party type of insurance is mandatory, but own-damage cover standalone or as part of a comprehensive plan is advised. Most insurance plans have an annual premium that must be paid to renew this protection they provide. Most of us have often wondered why this premium changes every year. In this article, we will tell you exactly why.

Why Does My Car Insurance Premium Change Every Year?

One of the major factors for changes in your car insurance premium is the Insured Declared Value (IDV) of your car. IDV is the market price of your car and it reduces with time due to depreciation.

Depreciation Rate Applicable on Cars

Age of Car

Rate of Depreciation

Under 6 months


6 months to 1 year


1-2 years


2-3 years


3-4 years


4-5 years


5-10 years


Above 10 years


Additionally, the IRDAI which is responsible for regulating insurance policy in India determines the rate yearly often changes them. Thus, because of these two primary reasons, the premium of your car insurance plan changes every year.

How Can You Keep Your Insurance Premium Low?

The following are some ways in which you can keep your premium low:

1. Timely Renewal: It pays to drive safely and keep your car in good condition. The NCB is the reward your company gives for a claim-free year and it increases with every passing year with up to a 50% rate in the sixth year. You can only reap the benefits of the NCB if you regularly renew your insurance.

2. Smart Claims: Avoid making claims for minor amounts to keep your NCB intact.

3. Install ARAI-Approved Anti-Theft Devices: These devices can help your car safety precautions but also many insurance companies offer a discounted rate for those who install them.


To conclude, the insurance premium depends on a number of factors, including the IDV and depreciation rate. Moreover, the premium that you may often get changed due to changes in the rates made by the IRDAI. However, there are a number of ways in which you can keep this rate low, including, the NCB, making smart claims, installing anti-theft devices etc.

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Disclaimer: 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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