Possible Causes of a Hike in Car Insurance Premium

Car Insurance

Car insurance is one of the mandatory regulations that every car owner needs to comply with. Not only a regulatory norm but also helps in safeguarding your financial interest in case of an accident or damage.

When you buy car insurance online, you might have noticed that your premiums increase each year slightly. Have you wondered why?

Let us look at the reasons for this hike in insurance premiums.

The regulatory body, Insurance Regulatory and Development Authority of India or IRDAI, is the authority that governs the norms for insurance in India. Similarly, it is responsible for standardizing the third-party premiums. Third-party policies are mandatory and cover any liabilities that arise out of accidents towards a third-party.

The IRDAI annually reviews the premiums taking into account the number of claims raised and loss ratios for insurance companies before hiking the premiums. Here are the premiums as prescribed for the financial year 2019-20. For the financial year 2020-21, IRDAI has not hiked these premiums in the recent light of events.

Table of Contents

For private cars

Engine CapacityPremium Amount
Not more than 1000 cc₹ 2,072
More than 1000 cc but not more than 1500 cc₹ 3,221
More than 1500 cc₹ 7,890

For two-wheelers

Engine CapacityPremium Amount
Not more than 75 cc₹ 482
More than 75 cc but not more than 150 cc₹ 752
More than 150 cc but not more than 350 cc₹ 1,193
More than 350 cc₹ 2,323

Different factors are considered by your insurer when revising premiums at the time of car insurance renewal. Here are some of those that are most likely to be considered.

Insured’s location: The premiums to your policy differ from each geographical region. For instance, you’re located in a Tier 2 city and you relocate to a Tier 1 city, the premium at your car insurance renewal will be higher. This increase is due to the additional risk that needs to be covered for your vehicle with the change of geography.

Insured Declared Value: Insured Declared Value or IDV is the maximum value that you will receive in case of a total loss or damage to your vehicle. The change in IDV will influence the amount of premium to be levied. Using an IDV calculator with a car insurance calculator will help in selecting an appropriate plan for you.

Terms and Conditions: There are instances where your insurance contract specifies an increase in the premium amount at each renewal date. It is important that you read your policy document thoroughly to be familiar with such terms that will have an impact on your premium amount.

Make sure you select a suitable car insurance policy that ensures a wholesome coverage for your vehicle. While the increase in the premium is nominal, you can take advantage of features like no claim bonus to keep it consistent over each period. Shop wise and select the best plan for you.

FadLy Handowo
My name is FadLy Handowo. I love experiencing new things and I am always looking for a new activity to try.

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