Calculating Premiums in Car Insurance

A car insurance plan is absolutely necessary in today’s day and age. You cannot take the risk of driving your cars on the Indian roads unless there is a valid car insurance plan in place. You therefore need to find a good cover. However, you also need to be careful about the costing of the policy as you need something that is comprehensive yet affordable. Take a look at this article to know how you can calculate your car insurance premium and then buy a viable cover.

How to calculate premiums in car insurance

Let us begin by looking at the factors that affect your car insurance premium. Once you know about these factors, it will become easier for you to get an idea about how your car insurance premium is actually calculated.

  • Type of cover: As we all know, car insurance is available in two forms – the third party cover and the comprehensive cover. The third party cover is a basic type of motor insurance that offers compensation for all third party claims. Such a plan does not have any provisions for your own vehicle. A comprehensive car insurance plan offers all the covers of a third party plan and along with that, also covers your own vehicle. The premium of a third party plan is cheaper than that of a comprehensive cover. So the type of plan you choose will have an effect on the premium you pay.
  • Make and model of car: The make and the model of the car greatly impact the premium. If you have a large and expensive car, you will have to pay a higher premium. If you have a small, inexpensive car, the premium amount will be much lower.
  • IDV: Did you know that the value of your car depreciates every year? Yes, that is correct. Like all other things around, the value or the market price of your vehicle drops as it ages. And since a car insurance plan covers the car entirely, the value of the cover reduces with time too. This is known as the insured declared value or the IDV. Your premium for the car insurance plan is calculated after calculating the IDV of your vehicle.
  • Add-on covers: You can buy riders or add-on covers along with your basic motor insurance plan. These riders offer additional benefits and help you to customise your car insurance coverage. If you add a few riders, the premium will go up. So the number of riders you have in your car insurance plan directly affects the car insurance premium calculations.
  • Available discounts: There are many discounts to expect in car insurance. To start off with, you can have the no claim bonus, if applicable. Then, you can get a discount for installing safety devices in the car. You can also have discounts for opting for the annual premium payment mode. These discounts definitely have a role to play in your car insurance premium amount.

All of the above mentioned factors are carefully taken into consideration when your car insurance premium is calculated. As a result, different people have different premium amounts even when they select the exact same car insurance policies.

Reasons to calculate premiums in car insurance

If you are wondering why it is important to calculate the premium beforehand, take a look at this:

  • Helps plan your finances: If you know exactly how much you have to pay towards your car insurance premium, you will be able to plan your finances in a better manner.
  • Helps choose the ideal cover: Everyone has a set budget. When you know what your premium amount is, you can choose a good plan in the range and maintain your car insurance cover with ease.
  • Helps in comparing: This is the biggest reason why you must calculate the premiums – it helps you to compare the available car insurance plan on the basis of the cost factor. You then get to choose the best plan at the best rate.


You can use an online tool and easily calculate your car insurance premium in just a few minutes. The car insurance premium calculators are simple and free to use. offers advance car insurance premium calculator. So make use of it and get to know how much you need to pay for your car insurance cover. Indeed, there are some very valid reasons why you need to find this out.

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