How your Car’s Cubic Capacity affects your Motor Insurance Premium

The Motor Vehicles Act, 1988 mandates all vehicles commuting on Indian roads to be covered by a basic car insurance, i.e., the Third-Party Liability insurance. This insurance covers the damage or loss caused to a third-party in an accident caused by the policyholder. In addition to the third-party insurance, the most commonly purchased insurance is the comprehensive cover.

The Comprehensive car insurance includes Own Damage cover, as well as Third-Party Liability cover. The comprehensive package is useful for people who are looking for protection of the vehicle against total damage through an accident, theft or natural calamities.

The third-party insurance cover is tariffed and managed by the Insurance Regulatory Authority of India, and is determined by the capacity of your car engine. In other auto insurance packs, such as the own-damage cover that protects you against damages to your own vehicle, the insurance provider decides the premium.

Third-Party Insurance Premium And Engine Capacity:

Cubic capacity is the total power produced by the engine of a car. This greatly influences the auto insurance premium for the third-party cover. The premium remains the same for new and old cars as it only varies by the size of the engine and not the car's age.

The cost of third-party cover is decided by the IRDA and is revised each year. The current figures are as follows:

Cubic Capacity Of Engine Premium in Rs.
Less than 1000 CC 2055
Between 1000 CC and 1500 CC 3132
More than 1500 CC 8630

Compulsory Deductibles And Engine Capacity:

parlance, compulsory deductible is the part of the claim amount that the policyholder pays at the time of a settlement. The insurer will pay the rest of the amount. The compulsory deductible needs to be paid mandatorily by the insured, and is applicable to everyone equipped with a car insurance. The compulsory deductibles vary based on the cubic capacity of the car, and it impacts the insurance premium to a large extent.

Insured Declared Value And Engine Capacity:

In the case of a comprehensive car insurance policy, the cubic capacity of your engine is a component, similar to the age of the car and your location, which impacts the Insured Declared Value of the vehicle. The calculation of the insurance premium is done using the following formula:

OD Premium = Insured Declared Value x Factor (after discount)

The factor varies based on the age of the vehicle, the location and the engine capacity, as shown below:

Cubic capacity of engine Zone A Zone A Zone A Zone B Zone B Zone B
Age of the vehicle
Less than 5 years Between 5 and 10 years Above 10 years Less than 5 years Between 5 and 10 years Above 10 years
Less than 1000 cc 3.127 3.283 3.362 3.039 3.191 3.267
Between 1000 cc and 1500 cc 3.283 3.447 3.529 3.191 3.351 3.43
Above 1500 cc 3.44 3.612 3.698 3.343 3.51 3.594


Since the capacity of your car engine determines the cost of your auto insurance, you need to ascertain that this is factored in when you purchase a policy. It is equally important to read your policy documents carefully to understand your coverage and make informed decisions at the time of a claim.

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

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