blog article banner

Car insurance is a financial safeguard that every vehicle owner needs. The Motor Vehicles Act of 1988 makes it legally compulsory for every car owner to get their car insured. Protection of your car is another vital aspect that is taken care of, once your car is insured. Getting to know the factors affecting car insurance premiums can take time and effort. We will help you understand the factors affecting car insurance premiums in this blog so that you make a well-informed decision when you are out in the market looking for car insurance.

Impact of Car Choice on Car Insurance Premiums

A significant factor that affects premiums is the type of vehicle you drive. Here is how the type of vehicle affects the premiums of car insurance in India:

  • Hatchbacks: Affordable and fuel-efficient, hatchbacks generally have lower premiums.
  • Sedans: Common and perceived as safer, sedans have moderate premiums.
  • SUVs: Known for sturdiness but considered a higher risk due to size and power.
  • Luxury Cars: With high price tags and expensive components, luxury cars command the highest premiums.

Effect of Geographical Location on Premium Costs

The location of the insured car plays a vital role in determining car insurance premiums. Higher car insurance premiums are common in metropolitan cities like Mumbai and Delhi but in rural cities, this is not the case. As these cities are heavily populated, the chances of accidents are higher along with that such cities also have high rates of thefts and vandalism, which increases car insurance premiums. Rural areas tend to be less populated which causes little to no traffic, which reduces the chances of accidents and makes the car insurance premiums in such areas comparatively low.

Effect of Age and Gender on Car Insurance Premiums

Statistically, drivers below the age of 25 are more prone to accidents. Therefore the car insurance premium for them is high. Car owners with a clean driving record are rewarded with lower car insurance premiums as they have a low-risk profile.

The gender of the car owner is an essential consideration that affects car insurance premiums. Lower car insurance premiums are enjoyed by female car owners while the car insurance premiums for male car owners are high. This is because statistics reveal that the rate of accidents for male car owners is higher when compared to female car owners.

How Does Your Car’s Insured Declared Value Affect Car Insurance Premiums?

Insured Declared Value (IDV) is the value for which your car is insured in situations of theft or complete loss of a car in a particular year. As the years go by and your car gets old, the insured car value also decreases. At the start of the insurance policy every year, the IDV is a value mutually agreed upon by you and your insurer. The premium for your comprehensive car insurance is calculated based on IDV. A low IDV implies a lower premium whereas a high IDV equates to a higher premium.

Impact of No-Claim Bonus and Add-On Covers on Insurance Premiums

No-Claim Bonus (NCB) is a reward for not making claims during the policy term. The bonus keeps accumulating over time and results in a reduced premium during policy renewal. Extra overhead coverage options like zero depreciation cover, roadside assistance, and engine protection, often referred to as add-ons, increase your car insurance premium as they provide expanded protection.

Impact of Voluntary Deductibles on Car Insurance Premiums

The amount you agree to pay out of your pocket in the event of a claim is called a deductible. Opting for a higher voluntary deductible can lead to a lower premium as you are assuming a greater share of financial risk in the event of a claim.

Tips to Reduce Car Insurance Premiums

Financially, paying a higher car insurance premium is not favourable. Here are some tips to help you understand and reduce your car insurance premiums:

  • Choose a safe vehicle
  • Install anti-theft devices
  • Maintain a clean driving record
  • Increase voluntary deductibles
  • Build a No-Claim Bonus (NCB)
  • Consider choosing need-based insurance


Understanding car insurance premiums can be complicated but with the right knowledge you can understand the concept and make safe and sound decisions. We hope this blog post has helped you understand the factors affecting car insurance premiums. Get in touch with our experts to solve any further queries. Email us at

You may also get your perfect quote with instantly and unlock exclusive discounts on car insurance with just a few clicks. Safe driving!

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.| EL/BLOGS/23-24/04



Alliance Insurance Brokers Pvt. Ltd.
8th Floor, Gold Crest, 10th Road, Juhu, Vile Parle (W), Mumbai 400 049, India
Monday - Saturday
9:30 am - 6:30 pm IST
CIN: U67200MH2003PTC141621
IRDAI Registration No.: 217
Valid from : 13/10/2021 to 12/10/2024
Category : Composite Broker
Principal Officer Name: Mr. S. V. Thakkar
*All discounts provided by insurers as per IRDAI approved insurance plans. Standard T&C apply.
Insurance is the subject matter of solicitation. For more details on policy terms, conditions, exclusions, limitations, please refer/read policy brochure carefully before concluding sale.
Visitors are hereby informed that their information submitted on the website may be shared with insurers for soliciting insurance policies.The product information for comparison displayed on this website is of the insurers with whom our company has an agreement.Product information is authentic and solely based on the information received from the Insurer.
© Alliance Insurance Brokers Pvt. Ltd. All rights reserved.
VisaUpdated Rupayupdated Mastercard AEUpdated Netupdated UPI 3 PayTM Gpay is best viewed through Internet Edge, Mozilla Firefox 16.x and +, Safari 5.1 and +, Chrome 23 and +, or an equivalent browser software. If your browser is older, you may have trouble viewing many of our web site features properly. If you are unsure of the version of your browser, you can determine it by choosing Help at the top of your browser window and then selecting About (your browser).