Knowledge Centre

Factors Influencing Your Car's Insurance Premium

Car insurance, especially third party liability only is a mandatory policy for all the car drivers in India. For covering the legal liabilities arising for damage caused to third party vehicle and person, a third party liability only policy is important. However, while driving on road it’s equally important to secure your own vehicle, as it’s highly probable to accidental damages. Keeping this in mind, HDFC ERGO has designed comprehensive long term car insurance policy which covers own damage along with third party liability as well as personal accident cover. Though the premium amount for comprehensive car insurance policy may pinch your pocket as compared to third party liability, the coverage is beneficial in the long run.

Questions such as how car insurance premium is calculated? Or how car insurance premium is calculated? Insurance advisors come across such questions almost every day. However, it is important to know that not one factor decides your car insurance premium in India; it’s decided by several factors. Let’s understand each and every aspect which decides the premium of your car.

Age of Vehicle & Model

Generally, vehicle wills higher engine capacity will incur higher premium and basic models would fetch lower premium. Similarly, if your vehicle is old the premium amount would be less as the IDV (Insured declared value) would be less as compared to a brand new vehicle.

Place of registration

Every insurance company has specific zones where the vulnerability of accidents is very high; at such zones either the insurance cover is denied or offered at a higher premium.

Purpose of Vehicle

A car used for personal commuting will attract a lower premium as compared to a two wheeler which is being used day in and out for commercial purpose.


In case the insured declared value, which is the total value of your vehicle fixed by the insurance company and it pays that value at the time of total loss, theft or burglary.


In case you have a no claim bonus earned for your previous year policy, you get a discount for the current policy. This discount will thus reduce your premium amount.

Safety gears

If your car is highly equipped against theft thanks to the safety devices, you will get a premium discount.

The above mentioned factors fix the premium, so a possible car insurance premium increase could be due to many reasons.

Awards & Recognition