Cars in India | Autoportal.com
Select City

Components of your car insurance - A detailed analysis

Snapshot: Ever wondered how insurance companies calculate car insurance premiums? Check our detailed study.

A car insurance is not just a document to save yourself from traffic fine, it is way more than that. A car insurance, like your health insurance, ensures that in case of any accidents, you can get your car fixed without paying much money at the repair shop. But have you wondered, how do the insurance companies reach at a conclusive amount, and why does it keep depreciating every year? 

Let’s run through the components that decide your premium.

What are the Components of car insurance premium?

The premium that you pay every year, has five total components, out of which, two are the most important ones and decides the value of the insurance to a large extent-  

·         Third Party Cover

·         Own Damage Cover

The other components are -

·         Discounts

·         No Claim Bonus

·         Service Tax

What is the Third Party Cover?

The third party component takes care of the damages caused to someone else by your car. The third party cover is fixed based on the car’s engine capacity.

Third Party Component = Engine Capacity of the car

Engine capacity of a car is measured in either Litres or Cubic Centimetres or CC. 1litre = 1000 cc and hence we can easily understand the engine capacity of the car. E.g, Maruti Suzuki Swift has a 1.2 and a 1.3 litre engine.

What is the Own Damage Cover?

Unlike the Third Party Cover, the Own damage Cover takes care of the damages caused to your own car. The calculation of the own damage cover depends on the Car’s IDV or Insured declared value which can be declared at the time of buying the insurance.

Own Damage Cover = IDV (Insured Declared Value)

IDV is the Insured Decared Value of the car and it decreases as the car becomes older. Hence, the premium of the insurance decreases as the car gets older. IDV value depends on the Age of the car and ex-showroom price of the car-

·         Age of the car

·         Ex-showroom price

Who offers Discount?

There are various discounts in place that can reduce your car insurance premium. Discounts are offered by insurance companies themselves and you can check the best offers on our partner, 'Coverfox' website.

What is NCB?

“No claim bonus”, or NCB, as it is commonly known as, is the percentage of discount that you get on the premium after a claim free year. Putting it in simple terms, if you don't avail any insurance in the given time frame, you are liable to get an additional discount from the insurer. Make sure to get the best NCB offer before buying the policy.

What about the Service Tax?

Last is the Service tax, which is the government authorized tax and varies depending on the government's policy. Current Service tax rate stands at 15%.

So now you know, how the premium of your car insurance is calculated! The total premium paid is the sum third party, own cover, discounts, NCB and service tax.

Premium = Third party+Own cover+Discount factor+NCB+service tax.

To check the lowest premium for your car, head on to the insurance section on our website.

Keep a tab here for more car insurance related articles!

Related car news

  • Why do you need car insurance? 13-10-2016 Arjit Garg Why do you need car insurance?
  • All you need to know about auto insurance claim procedure 18-02-2016 Pankaj Vig All you need to know about auto insurance claim procedure
  • Audi India announces offers of up to Rs 7 lakh Today Davender Soni Audi India announces offers of up to Rs 7 lakh
  • Toyota vehicle prices to be hiked by 3% from January 2017 Today Autoportal Team Toyota vehicle prices to be hiked by 3% from January 2017
  • Hyundai to implement in-house AMT gearboxes in upcoming models Today Autoportal Team Hyundai to implement in-house AMT gearboxes in upcoming m...
  • Ola could introduce a fleet of one million EVs by 2020 Today Autoportal Team Ola could introduce a fleet of one million EVs by 2020


Helpline