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Know How Insurance Companies Calculate Car Insurance Premium

The car insurance premium is the amount you pay to the insurer for the insurance policy you select.

Car insurance calculator helps you to compute the premium of the policy. It enables you to compare the car insurance quotes from different insurers. Car insurance calculator answers the different set of your requirements. The premium of your car depends upon the Insured declared value.

As you know about the benefits, inclusions, and exclusions of the policy. Let us have a look at the factors on which your premium cost is calculated.

Insured declared value (IDV)

Insured declared value (IDV) is the maximum amount you get when you claim under the premium policy to compensate for any loss or accident. IDV is the value that insurer places on the car to estimate its worth at the time an individual applies for motor insurance. For a new car, IDV is calculated on the basis of the price of that car, i.e. its showroom price. If you curious about car insurance renewal, then the IDV is calculated for any depreciation that the car undergoes of its age. The new car has more IDV as compared to the old car. IDV calculation is only done in a comprehensive insurance policy and not in a third party insurance cover.

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Cubic Capacity

Cubic Capacity is the measure of the size of an engine of the car. Engine size affects the insurance premium which an individual pay for a third party insurance cover. The higher the engine size, the higher is the premium and vice versa.

The location also affects the premium of your policy. India has been divided into two zones, A and B. The zones are divided depending upon the risk factors into those areas. Zone A includes cities like Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, and Pune. Rest of India falls in zone B.

Age of the Vehicle

Age of the vehicle is also an important factor that determines the car insurance premium. As the car ages, it loses the value due to a few reasons. The depreciation increases as a car get older. As older cars incur higher risk, they have a high premium. The wear and tear that the vehicle undergoes with the ages reduce the car value. The insurance company sets a schedule that applies to the vehicles adjusting the value based on how old the car is.

Every company set the insurance premium in a unique way.

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Calculation of premium for used cars: For calculating the premium of used cars, registration number, existing car policy details, car, and fuel type. After entering these details, the car insurance calculator estimates the premium cost you will pay for your car insurance policy.

Calculation of premium for new cars: Manufacturer name of the vehicle, make and model of the car, state of registration. Owner’s details are also important in this case. Based on these details, the car insurance calculator provides the estimated premium cost, which you will pay for your car insurance policy.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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