How is My Car Insurance Premium Calculated?

car insurance premium calculated
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A car insurance premium is a total cost of maintaining your car insurance policy. It is supposed to reflect the likelihood of a driver being involved in an at-fault accident or having other types of losses. This is ascertained by the insurance company underwriting the risk, which impacts the premium calculation. Some of the factors that affect the calculation of your car premiums are as follows:

Risks Related To Vehicles

In this, the fuel type, cubic capacities, the make and other specifications related to your vehicle are taken into account. The complete make of your car is considered. Also, the age of the vehicle is another parameter, so at the time of renewal if the insured Declared Value (IDV) determines the premium that you pay. Where, IDV is calculated by the age of the vehicle at the time of the renewal and the depreciation on the same. And for vehicles with less than five years old, depreciation is applied basis the number of years the vehicle is used, which is applied to the ex-showroom price to calculate their IDV. And for the vehicle that is older than five years, the market value is taken to be the IDV of the car.

Risks Related To Location

Location of registration and the place you live determines the premium calculation. If you live in a more populated place, that has a high record of thefts, falls under urban area, etc. gets the high premium as the chances of accident and collisions go soaring. Whereas on the other hand, if you live in a rural area, where there are less chances of collision gets the low premium.

Previous Claims Made

This includes your previous claim history and your driving record. So, if you’ve previously also claimed your vehicle insurance, the insurance premium of your car can go up.

No claim Bonus is another way of reducing your car insurance premium. More years without a claim mean more discount you can get on your premium.

Claims Related To Drivers

Who all drive the car their age, their sex, their marital status and their profession and multiple drivers can also impact the premium. Your age, your sex, your marital status and your profession has an impact on your premium rates.


This allows a complete claim for everything that goes in your car. Nil-depreciation or Zero depreciation is however bound to increase your premium but is considered useful.

One other method of calculating your car insurance all by yourself is by using and car insurance premium calculator. It is a valuable tool that helps you to determine premium of the insurance policy for your vehicle as well as compare insurance quotes from different insurers. Mention some of the details like the date of registration, car details, policy start date, and other coverage details and your work is done. Compare the quotes from different companies and choose the best-suited plan.

About the Author - Sneha Jaiswal
Sneha Jaiswal is an ardent reader, writer, blogger, jogger and hogger. Loves exploring the manual films (books) and places of adventure. A die-heart foodie and an extrovert.