Earlier, car insurance was perceived as a one-size-fits-all product, however, it is not the same anymore. Through digital platforms, one can buy a car insurance policy that is most suitable. Also, the cost of a car insurance policy depends upon a number of factors other than just the policyholder’s requirements. Some of these factors are the type of car, No Claim Bonus, number of Add-ons, type of car insurance policy, etc. In this article, we will discuss how the type of car affects its final cost.
Effect of Car type on Vehicle Insurance policy
The cost of your car insurance policy will depend on your personal requirements. Contrary to popular belief, it is possible to customize your car insurance. Thus, it is fully possible that if you and your friends bought say a comprehensive car insurance policy from the same insurance company, the cost of both the policies may be different.
The very first thing that can cause a change in the cost of vehicle insurance is the type of car. Nowadays, every imaginable type of car is available in the market. The basic segments are hatchback, sedan, and SUV (Sports Utility Vehicle). However, crossovers of each of these three segments are also available for purchase. Thus, the type of car plays an important role in the cost of its insurance policy. Let’s see the exact factors that change the cost of car insurance depending upon the type of car.
#1 Insured Declared Value
Insured Declared Value (IDV) is one of the most common term you will come across while buying car insurance online. This is nothing but the maximum amount your insurance company is liable to pay in case your car is stolen or gets damaged beyond repair. To determine the IDV of your car, simply calculate the current market price of your car and you can set the IDV around the price. As the market price of your car drops with passing time, its IDV also decreases.
Insured Declared Value (IDV) is the basic factor that your insurer will consider in order to determine the cost of your car insurance policy. Here is how Insured Declared Value (IDV) is calculated:
IDV = (Listing price stated by the manufacturer – Depreciation) + (Additional accessories – Depreciation)
Depreciation is the reduction in the monetary value of your car because of time and usage. Depreciation is taken into account as soon as you buy a car. It won't be wrong to say that depreciation kicks in as soon as the car leaves a showroom.
The following table lists how depreciation is calculated to determine the IDV:
Age of the car |
% of Depreciation for calculating IDV |
Not exceeding 6 months |
5% |
Exceeding 6 months but not exceeding 1 year |
15% |
Exceeding 1 year but not exceeding 2 years |
20% |
Exceeding 2 years but not exceeding 3 years |
30% |
Exceeding 3 years but not exceeding 4 years |
40% |
Exceeding 4 years but not exceeding 5 years |
50% |
Exceeding 5 years |
Depends on mutual understanding between insured and insurer |
#2 Engine’s Cubic Capacity
The engine capacity of your car will be taken into consideration especially if you buy a third-party car insurance policy. According to new rules, long-term third-party car insurance for cars with engine capacity of less than 1,000cc will cost Rs. 5,286. Cars with engine capacity from 1,000cc to 1,500cc will have to pay Rs. 9,534 for cars insurance. Finally, those who own cars with engine capacity of 1,500cc or more will have to shell out Rs. 24,305. Thus, higher the engine’s cubic capacity, higher will be the cost of car insurance.
This is how the type of car affects the cost of its insurance policy.
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