A car insurance calculator is an online facility that enables you to get quotes on car insurance from multiple insurance companies in India. When you are looking to buy car insurance, the first thing to do would be to get familiarised with the different types of coverage available in the market. Once this is done, you should ideally compare insurance plans between providers to narrow down on the most suitable cover for your specific insurance needs.
Calculation Of Premium:
The premium for car insurance is calculated based on several factors:
- The Insured Declared Value (IDV) of the car
- The cubic capacity of the vehicle’s engine
- The year of manufacture of the car
- The area of registration of the vehicle
- The No Claim Bonus (NCB) accrued under the policy
When a brand new vehicle is driven out of a showroom, its value will start depreciating. Over a period of time, the depreciation will increase bringing down its IDV. In other words, an 10-year old car will have a much lower IDV than a brand new vehicle of the same make and model.
Although the premium for car insurance depends on the IDV of the vehicle itself, there are several other factors that come into play when calculating this value. So, we cannot conclude that it will be more expensive to insure new cars when compared to old ones.
Car insurance premium is calculated based on the formula given below:
Final quote = Own-damage premium + Third-party liability premium + premium for add-on covers - NCB and other discounts
The car insurance calculator available at neutral financial websites uses this generic formula that gives you a premium quote closest to the amount you will be paying when you buy a policy from a specific insurer.
Third-Party Liability Premium Is Fixed:
The Insurance Regulatory and Development Authority of India (IRDAI) decides the premium for third-party liability coverage under motor insurance on an annual basis. The values for the financial year 2017-18 are as mentioned below:
|Private car engine capacity||Premium from 1 April 2017|
|Below 1,000 cc||Rs.2,055|
|More than 1,000 cc but less than 1,500 cc||Rs.2,863|
|More than 1,500 cc||Rs.7,890|
Own-Damage Premium - What It Encompasses:
The own-damage premium in car insurance is based on the IDV of the vehicle that is, in turn, dependent on the age and depreciation of the car. Each insurer would have predefined guidelines on calculating this value.
Listed below are the key factors that affect your own-damage premium:
- The type of vehicle - The make and model of the car has a bearing on the premium quoted. For instance, high-end cars are more risky to insure as they are more prone to theft and it will be more expensive to repair damages on them. Hence, owners of these cars will have to bear higher premiums.
- Modifications to the vehicle - If you have made any alterations to the car it is important that you inform the insurance company of the same. Modifications to the vehicle can increase or decrease the risk to the insurer; so such changes will have to be reviewed by the insurance provider. There may be subsequent alterations in the premium as well. In case you fail to inform the insurer, they may not honour your next claim and void the coverage altogether!
- The type of fuel used in the vehicle - The fuel type used in the car affects its insurance premium. So pay close attention to this when you purchase a car.
- Coverage chosen - If you have taken limited insurance coverage your premium will be low. However, opting for a comprehensive car insurance policy with add-on covers will bring up the premium. So, pick the insurance coverage carefully by assessing your needs in detail.
- Insured Declared Value - The depreciation on every vehicle is fixed based on industry guidelines, as shown below:
|Age of the car||Percentage depreciation|
|Less than 6 months||5%|
|Between 6 months and 1 year||15%|
|Between 1 year and 2 years||20%|
|Between 2 years and 3 years||30%|
|Between 3 years and 4 years||40%|
|Between 4 years and 5 years||50%|
|Above 5 years||This is calculated based on a mutual agreement between the insurer and the policyholder|
The IDV of the vehicle is determined by the rate of depreciation mentioned above. The vehicle’s condition is also taken into account for the same. The assessment or survey is done by insurance surveyors or dealers.
- Discounts offered by the insurer - No Claim Bonus is a benefit offered to a policyholder who does not raise any claims during the policy term. This is like a reward for being a good driver. The NCB can translate into an irresistible discount of up to 50% on the renewal premium! So, it is recommended to preserve the NCB by not raising claims for small damages. The rate at which a car owner earns NCB is as detailed below:
|Claim-free years||NCB, as percentage of own-damage premium|
Another noteworthy discount is the premium reduction you are liable to receive by opting for a voluntary excess. This deductible is the amount you agree to pay upfront at the time of a car insurance claim. Although this brings down your renewal premium by a significant amount, you should be careful to not overstate this value, as you may have difficulty honouring the agreed payment at the time of a claim.
Insurance companies also give discounts to customers who have valid memberships in automobile associations across India. Age-based discounts, bundling discounts, and discounts for anti-theft device installation are other deductions offered on premium.
- Area of registration - If you stay in a locality where theft is common, you will have to pay higher premiums. Even parking your vehicle in a dangerous zone may jeopardise your eligibility for insurance coverage. Also, staying in an accident-prone area will attract higher car insurance premium.
- Customer demographics - Other factors that affect the premium are demographics such as the marital status, occupation, and gender of the customer.
Why Is It Important To Use A Car Insurance Premium Calculator?
As is the case with all financial products, it is very important to do a good amount of research before buying a car insurance policy. Listed below are some advantages of availing the services of this tool:
- It helps you make a better decision as far as insurance purchase is concerned. You will also have good knowledge of the coverage offered by different insurers and the corresponding costs.
- The entire policy comparison process is simplified to a great extent.
- You need not furnish any paperwork for policy comparison; hence, it is hassle-free.
- You can get an overall view of the available insurance plans in the market.
- Some websites enable you to go one step further and buy car insurance instantly with limited paperwork. You may also get attractive premium discounts for buying insurance online.
What Information Needs To Be Updated For Car Insurance Premium Calculation?
The following details are usually required to get quotes through the car insurance premium calculator:
- Make and model of the car
- State of registration and date
- Year of manufacture of the car
- Type of vehicle insurance, i.e., private or commercial
If you are buying insurance for a used car, you will have to update the details of the existing car insurance policy, details of previous ownership, and claim history. It is important that you furnish accurate information in the calculator facility; else you may not receive the best deals out there. Apart from these, you will also have to update some personal details such as your age, name, and profession.
What Is Car Insurance Renewal Premium Calculator?
The car insurance premium calculator facility can also be used at the time of policy renewal. In fact, it is highly encouraged that you look around for better deals in the market at the time of policy renewal. You can use the car insurance renewal premium calculator facility and get an idea of the coverage offered by different insurance companies and the corresponding costs.
However when you are looking to renew your policy, the premium is not the only thing that you should consider. It is important to understand the claim settlement history of the insurer and the efficiency of its customer service department.
You should also review your updated insurance needs and decide on the coverage you actually require at the time of renewal. During this exercise you may find out that a limited insurance cover would suffice for you for the next year. This way you can save on premium by cutting down on the coverage without actually having to shift insurers.
If you are planning to buy/renew auto insurance anytime soon, the car insurance calculator facility is an inevitable part of your purchase journey. You would be aware that this facility is offered without any additional charge at neutral financial websites. So it is imperative that you familiarise yourself with this tool and make a judicious purchase.
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