Top 7 Factors That Affect Your Car Insurance Premium
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Buying a car is a big milestone, but it also comes with responsibilities: one of the most important being its insurance. Whether you own a brand-new vehicle or a second-hand one, insurance is mandatory in India. But here’s the catch: the premium you pay is not the same for everyone.
Different drivers, different cars, and different locations all influence how much you’ll be charged. Understanding these factors can help you save money and choose the right car insurance policy for your needs.
Let’s look at the top 7 things that affect your premium.
Engine Size
The size of your car’s engine directly affects your insurance cost. Vehicles with larger engines (measured in cubic capacity or CC) are usually faster and more powerful. That also makes them riskier to insure.
For example, a small hatchback with a 1000cc engine will usually have a lower premium compared to a luxury SUV with a 2500cc engine. Insurance companies view bigger engines as more expensive to repair or replace, which raises the premium.
So, when buying a car, remember: the bigger the engine, the higher the car insurance premium.
Indian vs. Imported
Whether your car is manufactured in India or imported plays a huge role. Imported cars come with higher repair costs, expensive spare parts, and limited service availability. That’s why premiums for imported vehicles are much higher.
On the other hand, cars made in India have easily available spare parts and lower repair costs, which translates into a cheaper car insurance policy.
If you’re planning to buy an imported luxury car, keep in mind that you’ll also be paying more to your car insurance company each year.
Car Age
The age of your car is another major factor. New cars usually attract higher premiums because their market value is higher, meaning the insurance payout in case of damage or theft will also be higher.
Older cars, on the other hand, lose value over time due to depreciation. Since their resale value is lower, the premium for insuring them also drops.
However, if your old car has frequent repair issues or lacks safety features, the insurer might still charge a slightly higher premium. When you renew car insurance online, you’ll notice these age-based differences clearly.
Your Location
Where you live and drive your car also affects the premium. If you’re in a metro city like Delhi, Mumbai, or Bengaluru, the premium will be higher. That’s because dense traffic, higher accident rates, and theft risks increase the chances of claims.
If you live in a smaller city or town with less congestion, your premium is usually lower. Car insurance companies use data about accident rates, theft cases, and overall road conditions in different areas to calculate your premium.
So, your postal code is more important than you think when it comes to insurance!
Driver Profile
Believe it or not, your personal profile also matters. Insurance companies often look at your age, profession, and driving habits to assess risk.
- Young drivers, especially under 25, are considered higher risk because of limited experience, leading to higher premiums.
- Certain professions that involve long-distance driving or odd hours may also increase premiums.
- On the flip side, experienced and careful drivers in stable professions might enjoy lower rates.
When you buy or renew car insurance online, these personal details are factored in by your insurer.
Car Add-Ons
Fancy accessories might make your car stand out, but they also raise your insurance premium. High-end music systems, alloy wheels, sunroofs, and security systems add to the car’s overall value. If damaged, replacing them is costly.
Most car insurance companies consider these additions when calculating your premium. While essential accessories like airbags are standard, luxury add-ons can increase your costs.
Covers and Add-Ons
Every insurance plan comes with exclusions: things that aren’t covered. At the same time, you can customise your cover by adding riders like zero-depreciation, roadside assistance, or engine protection.
The more riders you add, the higher your premium will be. However, these add-ons provide peace of mind and better protection. For example, a zero-depreciation rider ensures you get the full claim amount without deductions for wear and tear.
Why Smart Choices Matter
Understanding what impacts your premium helps you make informed decisions. From engine size to your driving habits, every detail matters. Instead of blindly accepting whatever your insurer charges, take the time to compare, customise, and choose wisely.
Whether you’re buying a new car or renewing an old one, remember that the right choices today can save you thousands tomorrow.
Invest time in researching car insurance online, compare options, and pick the plan that suits your needs. With Generali Central Insurance, you’ll not only safeguard your car but also ensure you’re not overpaying for the protection you deserve.
Disclaimer: No Business Standard Journalist was involved in creation of this content
Topics : Car insurance policy
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First Published: Sep 18 2025 | 5:06 PM IST
