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Factors Affecting Motor Insurance Premium

Motor insurance is an insurance for your vehicle that has been deemed mandatory by the Indian Government. According to the Motor Vehicles Act, 1989, all types of motor vehicles like cars, commercial vehicles, jeeps, and motorbikes have to be insured.

Importance of Motor Insurance

There are several reasons to ensure that your vehicleis covered by comprehensive motor insurance. Some of them are as follows:

  • Lack of roadways infrastructure especially within cities

  • In case of any accidents, it covers the damages, thus taking care of liabilities

  • If you choose the right policy, it also covers for hospitalisation

  • In case of demise, the right policy also covers the family

What Are the Factors Affecting Motor Insurance Premium?

It is great that you are looking at getting motor insurance However, what is the premium that you would be able to pay? Will the insurance provider give you a policy with that desired premium? Here is a list of factors that will determine this.

1. Gender and Age: Statistically speaking, young men are more prone to accidents than young women and thus, there are more chances of accidents leading to insurance claims. Hence, insurance is given to young men at a higher premium as compared to young women.

2. Location: Location is one of the primary factors that insurance providers look for while signing a policy to a customer. For instance, if a person lives in an accident prone area, chances are that his premium will be higher in comparison to someone living in a relatively quieter area with a low percentage of such incidents. Moreover, car thefts are common in many areas with high unemployment and low literacy rate that is also a point of consideration.

3. Type of Engine: Does your engine run on diesel? Then you might have to pay a high premium because diesel vehicles are costlier than petrol vehicles which directly impacts the Insured Declared Value. Thus, the higher the price of the vehicle, the higher the IDV will be. This will also lead to an increased premium.

4. Safety Fittings: If you take care of your vehicle, your vehicle will thank you with low premium rates. If your car is fitted with safety amenities like gear lock, GPS, and airbags to name a few safety fittings, the risk of it getting stolen goes down drastically. This instills confidence in the insurance provider that there won’t be frequent insurance claims and will consider these amenities while setting the premium rates.

Legal Needs

Simply put, if you get motor insurance, you are safeguarding yourself from legal implications.As per the Motor Vehicles Act, 1989, motor vehicle owners must insure their vehicles against accidents and third-party liabilities. Thus, get insured and save yourself from the legal hassles.

Types of Motor Insurance

1. Comprehensive Motor Insurance

As the name suggests, it is an inclusive insurance that covers damages incurred during accidents, third party liabilities, natural calamities, terrorist attack, theft and fire to name a few. This coverage can be enhanced with a few add-ons like Zero Depreciation (which ensures the value does not go down with the depreciated vehicle), engine protection, tyre protection and roadside assistance .

2.Third Party Motor Insurance


In insurance terms, you are the first-party in the insurance policy if you own the vehicle. If you happen to meet with an accident that involves another person, then that person is the third party whom you’ll be liable to pay damage charges to. The third party motor insurance covers claims for this loss and damage.


It is better to be safe than sorry. Secure yourself with an iron clad motor insurance and protect yourself in the case of mishap that not only impact your wallet but your peace of mind as well.

This blog has been written by

S. Gopalakrishnan | Motor Insurance Expert | 40+ years of experience in insurance industry

A veteran in insurance industry. S. Gopalakrishnan is a name to reckon with in the field of reinsurance, he has headed the Reinsurance department and has rich experience in other fields of motor insurance. He loves to share his opinion on latest topics in the insurance industry and how he can help people in safeguarding their assets using insurance products.

Mr.S. Gopalakrishnan recommends"HDFC ERGO for your vehicle insurance needs, it has always put customer’s interest at the forefront, with round the clock assistance to deal with emergency breakdown issues and hassle free claims process. You can be assured of complete and reliable guidance through the whole process."

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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