Did you know? According to a 2023 report by IRDAI, most vehicle insurance premiums in India are influenced by just three factors — the car’s model, the driver’s age, and the registered location.
Understanding what affects your premium is more than just financial knowledge; it's a step toward making better car insurance choices. A premium isn’t just a random figure thrown at you by your insurer. It’s based on logic, risk evaluation, and some nuanced calculations. And yes, factors affecting car insurance rates like your car’s model, your age, and even your pincode can quietly tip the scale. Let’s break it down.
How is your car insurance impacted?
Car insurance is fundamentally a risk-based product. The higher the perceived risk, the higher the premium. If you drive a high-speed sports car in a city with high accident rates and you're a new driver, the insurer sees red flags. On the other hand, a family hatchback used occasionally in a low-crime town? Much lower risk.
Your premium in car insurance is shaped by a mix of external and internal risk elements. And some of them may surprise you.
What are the things that impact your car premiums?
Let’s take a closer look at the factors affecting car insurance rates.
1. Car model and type
Your car’s brand, make, fuel type, engine capacity, and even variant play a significant role in determining your premium.
· Luxury vs. Budget: Insuring a Mercedes will cost more than insuring a Maruti. Luxury cars come with expensive spare parts and higher repair costs and are more likely targets for theft.
· Engine Size Matters: A car with a 2.0-litre engine is considered riskier (and more expensive to repair) than a 1.2-litre engine vehicle. The premium reflects this.
· Fuel Type: Diesel cars often attract higher premiums than petrol variants due to higher repair and maintenance costs.
· Safety Ratings: Cars with better safety ratings, airbags, ABS, and immobilisers may fetch lower premiums as they are considered safer.
Tip: Opting for models with high safety features can help bring your car premiums down.
2. Location and driving environment
Your location influences what affects car insurance premiums in unexpected ways.
· Metro vs. Tier-2 Cities: Cars registered in high-traffic urban areas like Delhi, Mumbai, or Bengaluru attract higher premiums due to increased accident and theft risks.
· Coastal vs. Inland Areas: Coastal regions may have a higher risk of rusting and salt damage. Premiums may be adjusted accordingly.
· Theft-Prone Areas: If your residential pin code is flagged for frequent car thefts, be prepared to pay more.
Tip: Parking your vehicle in a secure, covered space and installing anti-theft devices can help mitigate this.
3. Your age
Yes, age is more than just a number in the insurance world.
· Young Drivers (18–25): Statistically more likely to be involved in road accidents. Hence, insurers charge a higher premium.
· Middle-aged Drivers (30–50): Usually experienced and cautious. Lower accident risk = lower premiums.
· Senior Citizens (60+): Premiums may again increase slightly due to health-related risks impacting driving performance.
Tip: A clean driving record can help keep your car premiums low, regardless of age.
4. Usage of vehicle
How often and why you use your car also matters.
· Personal vs. Commercial Use: A private vehicle used for daily office commutes or weekend drives has a different risk profile than a commercial vehicle.
· Frequency of Use: If your car is clocking more miles regularly, it’s more exposed to risk, thus attracting a higher premium.
· Interstate Travel: Cars frequently used for long intercity drives may also carry a slightly higher risk in the eyes of the insurer.
Tip: If you’re an occasional driver, explore 'pay-as-you-drive' plans to lower your premium in car insurance.
5. Add-on coverage and policy benefits
Extra features come at an extra cost.
· Zero Depreciation: Great for new cars, but it adds to your premium.
· Engine Protection Cover: A must-have in flood-prone areas but, again, increases cost.
· Roadside Assistance, NCB Protect, Return to Invoice: Handy benefits, but every add-on adds a cost.
Tip: Only opt for add-ons that match your driving needs. Don’t over-insure.
Final thoughts
There’s no one-size-fits-all approach to car insurance. What works for a city dweller driving a new SUV may not suit someone with a second-hand sedan in a small town. By understanding what affects car insurance premiums and how factors like car model, your age, and location play a role in your premium calculation, you can make more informed choices—and possibly save a good chunk of money.
Planning to renew or buy car insurance? Choose a plan that offers flexibility, transparency, and comprehensive support—just like Generali Central Car Insurance. Stay protected, stay smart.
FAQs
Q1. Does the age of my car affect the insurance premium?
Yes, older cars generally attract lower premiums for own damage as their Insured Declared Value (IDV) decreases. However, repair costs might still be high depending on parts availability.
Q2. Can my car’s colour affect my premium?
No, car colour doesn’t affect your insurance premium in India. It’s a myth. What matters more is the make, model, and engine size.
Q3. I moved from Delhi to Indore. Will my premium change?
Yes, changing your location can impact your insurance premium. Moving to a low-risk city may reduce your premium amount.
Q4. Is it cheaper to insure used cars?
Usually, yes. Used cars have a lower IDV and thus a lower own-damage premium. However, older vehicles may need more maintenance, which can influence your claims.
Q5. Does installing a CNG kit affect my car premium?
Yes, it does. Since the vehicle is being modified, it adds risk in the insurer’s eyes, and the premium may slightly increase. You also need to inform your insurer about this modification.
