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How The Age Of A Car Affects The Auto Insurance Premium

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There is an inherent relationship between the age of a car and its auto insurance premium. The method of calculation of the policy premium is a math that all car owners should be aware of. Insurance companies consider all aspects of risk as evaluation factors that affect the cost of premium.

Underwriting Factors That Impact Premiums:

The actual evaluation parameters that affect auto insurance premiums vary between insurers. However, fundamental factors can be largely divided into the following categories:

  • The claims history of the insured car.
  • The place where the vehicle was registered. The locality where you stay will also impact the premium calculation. If the car is parked in an urban neighbourhood, or a highly populated area close to busy roads, you will have to bear a higher premium. Localities with increased incidences of thefts and crimes will also garner higher cost of policies.
  • Special features added to the vehicle after purchase, such as adding a music player or alloy wheels.
  • The engine capacity, fuel type and all other relevant features of the car.
  • Profession of the car owner. Insurance providers offer discounts to policyholders who are engaged in specific professions. So, if you are a government employee, a doctor, a soldier in the armed forces or a chartered accountant, you will receive special discounts on premium that people in other professions will not be able to avail.

Age Of Your Car At Renewal:

At the time of an auto insurance policy renewal, the age of the car will be highly prioritised. The age will be used to calculate the Insured Declared Value, i.e., IDV of the vehicle, and also the premium. The IDV is calculated based on the number of years the car was used and the depreciation on its ex-showroom price.

The table below details how the age of a vehicle influences its depreciation and subsequently the IDV.

Age of Car % Depreciation for calculating IDV
Less than 6 Months 5%
6 Months - 1 Year 15%
1-2 Years 20%
2-3 Years 30%
3-4 Years 40%
4-5 Years 50%

Cars that are older than 5 years are not included in this table. For such vehicles, the market value is assumed to be the IDV, and it is agreed upon through discussions between the insurance provider and the policyholder.

Apart from these factors, the premium is also influenced by the bonuses and discounts that the insurance company offers you.

Motor Insurance Bonuses:

  1. No-Claim Bonus - The no-claim bonus(NCB) is a benefit given to a driver for not making any claims during a policy year. The bonus provides a discount on premium for subsequent renewals of the policy. The table below shows how the NCB improves with the increase in the number of claim-free years.
    Claim Free Year Bonus (%)
    1 Year 20%
    2 Years 25%
    3 Years 35%
    4 Years 45%
    5 Years 50%
  2. Higher voluntary deductibles - The deductible is a part of the claim amount that you are required to pay before the insurance provider contributes his share. This is more useful for a driver with good driving history, as he would be able to make good savings on the cost of the policy. Opting for voluntary deductibles reduces your premium by an amount between Rs. 1,500 and Rs. 15,000. Your positive driving history may also earn you a discount on the deductibles - a win-win situation altogether.
  3. Loyalty discounts - If you are thinking of renewing your auto insurance policy with the same insurance company, you can enquire about loyalty discounts that are commonly offered by them. Most insurers provide loyalty benefits to policyholders for the purpose of customer retention.
  4. Discounts on the basis of memberships - If you are a member of registered groups like the Automobile Association of Upper India or the Western India Automobile Association, you can avail certain concessions on the premium of your policy.
  5. Safety installations - If your car is equipped with anti-theft devices or other modern safety equipments that are approved by the Automotive Research Association of India (ARAI), you are eligible for certain rebates on your auto insurance policy.
  6. Add-on covers - Opting for add-on covers with your car insurance policy will undoubtedly, increase the premium. But add-on coverage acts as a security blanket that offers you protection from depreciation deductions and the like. If you opt for add-ons judiciously, you can benefit immensely in the long run. For instance, the Zero Depreciation add-on cover contributes an additional amount to the premium, but it can provide you adequate protection for eventualities.

In conclusion, it is important to weigh out the options available to you, in order to identify the coverage that best suits your insurance needs. You should also take care to avoid policy lapses, as this can disqualify you from discounts that you are eligible for. Apart from this, you should also compare policy pricing from multiple insurers at the time of purchase or renewal of your policy, to avail the best discounts and rates.

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

Claim Reviews

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  • Royal Sundaram Car Insurance
    "Average"
    0.5 3.0/5 "Satisfactory"
    I took my car insurance with Royal Sundaram. I never contacted the customer service. It is a default insurance from the showroom. The premium is high because I go for bumper to bumper offer, road side assistance, zeo dep. It is a first party insurance and no claim. The policy period is one year.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 19, 2019
  • SBI General Car Insurance
    "Good Policy"
    0.5 4.0/5 "Great!"
    The showroom people has offered me a car insurance policy with SBI. I have made a premium amount of Rs. 22000. They have given me a coverage value of 100%. Total IDV value is 90% of the car value. I have no claim experience till now. The documentation process was done by showroom.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 19, 2019
  • National Insurance Car Insurance
    "Smart protection with National"
    0.5 4.0/5 "Great!"
    The major factor to chose National Insurance because of the premium is economic, I took the policy for 3 years the IDV value remains the same for the whole tenure. The customer support is good on time they activated the policy. I have Tata Tiago , its around four months vehicle. Its zero depreciation comprehensive plan. I taken the policy through showroom.
    Was this review helpful? 0
    , lucknow
    Reviewed on Jan 19, 2019
  • ICICI Lombard Car Insurance
    "Satisfied with the policy"
    0.5 5.0/5 "Blown Away!"
    My car insurance is with ICICI Lombard. The customer services are good and I got the policy documents on time. The policy coverage is good and there are features of a road side assistance is there. The premium is economical too. Good overall.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 19, 2019
  • ICICI Lombard Car Insurance
    "Need to reduce the premium"
    0.5 3.0/5 "Satisfactory"
    I had a car insurance from ICICI LOMBARD which was offered by the showroom at the time of purchasing the vehicle. I felt the insurance premium is very high compared to others. I got a reminder call from the customer service at the time of renewal. It has zero dep for one year.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 19, 2019
  • Tata AIG Car Insurance
    "Excellent"
    0.5 5.0/5 "Blown Away!"
    I took my car insurance from TATA AIG through online channel. They have given lesser premium with zero dep and it includes road side assistance. The customer service is very good. The policy period is one year. I have no claim experience. It is a first party insurance.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 19, 2019
  • Tata AIG Car Insurance
    "Satisfied policy"
    0.5 5.0/5 "Blown Away!"
    TATA AIG is the best company to take the car insurance. Since long time i have taken this insurance. The customer care people used to call me to renew the policy and they used to policy renewal letter. I will do payment through online. Several times i have claimed the policy and i have received very good response.
    Was this review helpful? 1
    , hyderabad
    Reviewed on Jan 18, 2019
  • Universal Sompo Car Insurance
    "Excellent Service"
    0.5 5.0/5 "Blown Away!"
    I had taken this insurance policy a long time back and it has been a good insurance policy. I had been paying the premium online and the payment method has been convenient. There has been a claim made once and the claiming method has been simple.
    Was this review helpful? 0
    , navi mumbai
    Reviewed on Jan 18, 2019
  • New India Car Insurance
    "Comprehensive benefit policy"
    0.5 5.0/5 "Blown Away!"
    My car insurance was taken from New India. I don't speak with their customer care since i don't require it. I had a claim experience which is a easy process without any tension. As per their policy, the maximum claim amount settled. Since they are providing good services i have opted this policy. They have given me a road side assistance and bumper to bumper facility.
    Was this review helpful? 0
    , chennai
    Reviewed on Jan 18, 2019
  • Bajaj Allianz Car Insurance
    "Good to Go with Bajaj"
    0.5 4.0/5 "Great!"
    The conditions and the insured which they are providing is good, I have insured Ford Car with Bajaj Allianz, the premium amount is reasonable but they can reduce it. Its 1.5 year old year but still the insurer providing 24 hours service, cash less garages and they have tie up with many centers, the response is great.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 17, 2019
  • ICICI Lombard Car Insurance
    "Premium should be standard as per market"
    0.5 4.0/5 "Great!"
    I never used the policy if something happen I claim it, I didn't interact with the customer care but I get the reminder message for car renewal. I have insured my maruthi Suzuki riz with ICICI Lombard, The premium is higher but still they are good.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 14, 2019
  • HDFC Ergo Car Insurance
    "Very good"
    0.5 5.0/5 "Blown Away!"
    Even my car was insured with HDFC Ergo. It is a second-end car and have chosen the third party insurance. I have not done any claim so far. The premium is reasonable. It offers bumper to bumper facility and road side assistance. The policy period is 2 years.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 14, 2019
  • Tata AIG Car Insurance
    "Good Insurer"
    0.5 5.0/5 "Blown Away!"
    My financier suggested the Tata Aig general insurance, the premium is economical for the car policy. I have honda amaze car it got insured with them. The insurance company is providing 24 hours service, cash less garages, brake down service for the tenure of four years. On time I got the papers from the Tata Aig.
    Was this review helpful? 1
    , tirupur
    Reviewed on Jan 10, 2019
  • Tata AIG Car Insurance
    "Good Insurer"
    0.5 5.0/5 "Blown Away!"
    My financier suggested the Tata Aig general insurance, the premium is economical for the car policy. I have honda amaze car it got insured with them. The insurance company is providing 24 hours service, cash less garages, brake down service for the tenure of four years. On time I got the papers from the Tata Aig.
    Was this review helpful? 0
    , mumbai
    Reviewed on Jan 10, 2019
  • National Insurance Car Insurance
    "Excellent Service"
    0.5 5.0/5 "Blown Away!"
    I had taken this Insurance policy for my Maruti Car and i had been paying the premium on an annual basis. The premium amount has not been too high and there has been cash less garages available with this insurance policy. Their customer support has also been helpful at times.
    Was this review helpful? 1
    , pune
    Reviewed on Jan 09, 2019
  • ICICI Lombard Car Insurance
    "Nice Policy"
    0.5 4.0/5 "Great!"
    My car was insured with ICICI Lombard. Last year i have purchased this insurance policy. My wife has referred me about this policy. I pay the premium amount of Rs. 13500. They have given me a convenient IDV value. I had no claim experience so far.
    Was this review helpful? 0
    , new delhi
    Reviewed on Jan 09, 2019
  • New India Car Insurance
    "Need to improve the service"
    0.5 3.0/5 "Satisfactory"
    I'm not satisfied with the service provided by new India. I have bought the car insurance policy. They closed their branch on every weekends hence its difficult to renew the policy. I have been paying the premium amount of Rs. 14000 which is a competitive price. They have given the IDV value of Rs. 1.50 lakhs.
    Was this review helpful? 0
    , mangalore
    Reviewed on Jan 09, 2019
  • New India Car Insurance
    "Average Car Insurance"
    0.5 3.0/5 "Satisfactory"
    My car insured with the New India Insurance company. I have been renewing the policy with the same company for 3 years. I have paid the premium amount of Rs. 7000 and they have offered me a satisfied coverage value. The documentation process was fine
    Was this review helpful? 0
    , mangalore
    Reviewed on Jan 09, 2019
  • review Car Insurance
    "Its Good"
    0.5 3.5/5 "Pretty good"
    Last year I had car policy with Bharthi axa whenever I try to renew it ask my poliy no, whenever I mention the same, it shows the its incorrect. If I try to reach the customer care its not reachable. I done the claim, some minor damage back side of the car, they have processing fee 1500. Remaining all taken care by the insurer.
    Was this review helpful? 0
    , bangalore
    Reviewed on Jan 08, 2019
  • ICICI Lombard Car Insurance
    "Great Policy"
    0.5 4.0/5 "Great!"
    ICICI Lombard has a good brand value hence i have selected the car insurance policy with this card and the dealer has also recommended about this policy. I pay the premium amount of Rs. 9000 and this is a 100% coverage with bumper to bumper facility. I'm not sure about the IDV value. Its easy to renew the policy.
    Was this review helpful? 2
    , new delhi
    Reviewed on Jan 08, 2019
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