What Are Those Elements That Increase or Decrease Your Motor Insurance Premiums?


All vehicle owners are aware of the necessity to have motor insurance coverage as the law, the Motor Vehicles Act, makes it mandatory. But when selecting an insurance policy, its premium is an essential factor. For many, it can be a deal breaker and thus it is critical in deciding whether to opt for a particular plan, both at purchase as well as vehicle insurance renewal.

If you are out there looking for a motor insurance plan, the question of what exactly impacts the premium might surely have crossed your mind. This article aims to answer that burning question helping you have a clear understanding, whether you buy a private or commercial vehicle insurance.

Insured declared value (IDV)

Insured declared value, also commonly referred to as IDV, is common terminology that all motor insurance plans include. It is the utmost amount that an insurance company will compensate in the instance of damage to your vehicle that is beyond repair. Often misinterpreted as the resale value, it, in fact, is arrived after accounting for depreciation from the present estimation of the four wheeler or bike. Since IDV is the compensation paid by the insurance company, the premium is impacted. Thus, greater the IDV, subsequently greater is the premium. * Standard T&C Apply

Types of motor insurance

The type of insurance policy is also determinant in deciding the premium. There are two types of motor insurance plans available —third-party plans and comprehensive covers. A third-party plan, also known as liability-only cover provides for the damages to a third person which can be in the form of property damage or compensation for injury or death. However, it offers no coverage for the repairs to the policyholder’s vehicle. Since these plans offer limited and mandatory coverage, the regulator, IRDAI, determines the premiums for these policies. On the other hand, for a more extensive coverage, comprehensive policies can be chosen which includes own-damage cover alongside the third-party cover. As the scope of a comprehensive plan is broader, the premiums are on the steeper side. Please visit the official website of IRDAI for more details.

Add-on riders

An extension of comprehensive plans are the add-on riders that offers the facility to customise the policy coverage. These additional features are optional and can be purchased alongside a standard comprehensive policy. Being optional in nature, they are not included in the standard policy scope and hence are priced over the standard plans thereby impacting premiums. So, make sure to select the right set of add-on as they have a direct bearing on the price of your insurance policy. * Standard T&C Apply

Location of registration

The registration location is another factor that impacts the premium of your policy. Vehicle insurance premiums are classified in two zones—Zone A comprising of eight metro cities of Kolkata, Chennai, New Delhi, Mumbai, Bengaluru, Hyderabad, Pune and Ahmedabad while Zone B which includes rest of the country. So, based on the registration location, the premium of your policy is determined.

Vehicle’s usage

The purpose for which a vehicle is used is an essential determinant for its premium. Motor vehicles used for commercial purposes have a higher premium for the risk that an insurance company has to undertake whereas private vehicles have lower risk. Thus, the premiums for the latter are affordable.

These are some of the different factors that result in the premiums either increasing or decreasing. So, the next time you are pondering on how the premium is impacted, keep these elements in mind. Also, please bear in mind that insurance is the subject matter of solicitation. For more details regarding features, what’s excluded, terms, conditions, please read the brochure / policy wordings carefully before finalizing a sale.