Important Factors Which Impact Your Car Insurance Premium

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Car insurance is mandatory for every car owner for their personal safety as well as those traveling with them when they are driving. It helps protect the vehicle against damages via accidents or natural calamities, besides safeguarding from claims from third parties if the car owner is responsible for a mishap.

Like general insurance, car insurance is a very competitive industry. To avoid paying too much or suffer the consequences for not getting adequate coverage, it makes sense to thoroughly research the various options available.

Since car insurance premium and the benefits offered vary from provider to provider, buying the right cover can be challenging. Moreover, it is not always a question of looking for the lowest premium even though this can be tempting, as there are many factors that impact car insurance premium.

The insurance market is full of different types of policies customized to consumer needs and the premium amount is usually calculated based on this. Here is a brief overview of the factors based on which car insurance premium is determined:

The type of car

This relates to the following details:

  • Car model number
  • Name of manufacturer
  • In which year was the car manufactured?
  • Place of registration
  • Category in which it is classified (sedan, minivan, entry-level sedan or luxury car, mini/compact/mid-size/full-size SUV, pickup truck, utility, special purpose vehicle)
  • Fuel type (whether diesel, petrol, CNG or electric car
  • Car condition (used, new)
  • How is the vehicle going to be used
  • Number of kilometres covered (fewer miles, lower risk)
  • Modifications, extras and add-ons (entertainment, alloy wheels
  • Present showroom price

The above criteria are taken into account while calculating car insurance premium


The age, gender and experience of the person driving the car will impact premium rate along with their claim history.

Voluntary excess and deductibles

Voluntary excess allows the car owner to bear a portion of the damages when a claim is made. Depending on the amount you agree to bear, the insurance company will offer a reduced premium rate. The higher the voluntary excess amount opted for, the better the discount on car insurance premium. When you settle minor claims on your own without claiming insurance, your premium can come down by as much as 30%.

Policy coverage terms

Depending on coverage chosen, the premium is accordingly calculated. The more coverage you opt for, the higher the premium. Go only for add-ons that are absolutely necessary.

Claiming small expenses

If you have bought car insurance previously and have not made a claim, you are eligible for a no claim bonus for each claim free year. Car insurance is supposed to protect against vehicle damage. However, it may be sensible to carry out repairs to minor damages such as a scratch or a dented bumper via your local garage as the no-claim bonus can mean a premium reduction of up to 50%. Thus, if the no-claim bonus is higher than the cost of repairs, avoid making the claim with the insurance company.

An important point to remember here is that the car insurance is linked to the car owner and not the car. This means that any no-claim bonus you accumulate on a policy is transferable to a new car. When you sell your old car, keep the insurance in your name. Get a no-claim certificate from the insurance company even if you do not plan to buy a new car right away. The bonus is valid for three years.

Price shopping 

It is not uncommon for insurance companies to make a lot of promises such as free insurance. While some may actually offer freebies, it is important to compare different offers and read the fine print to avoid ending up with inadequate coverage. Look for policies that cover any car modifications, should you decide to make them.

Security features

If your car is equipped with gadgets such as anti-theft alarms, gear and steering locks and other safety features it means reduced risk for the insurance company and this will earn you a lower premium rate.

Membership in Industry associations

If you are a member of the Automobile Association of India and other associated bodies registered under the Motor Vehicles Act and Rules, you may be eligible for special discounted premium as this raises your standing with the insurance company.

While bearing the above in mind, remember to always approach an insurance company directly or go to one of its authorized agents to avoid being scammed. Rather than approach different insurance companies for your car, home and other insurance needs, get your policies from the same company to save significantly on premium.

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