Does Cubic Capacity Impact Your Car Insurance Premium?

Yes, cubic capacity or CC is a major factor in determining your car insurance premium. A vehicle with a high CC engine will be able to deliver more power and speed, thereby increasing the chances of getting into an accident and the associated costs of repair. For this reason, insurers classify them as high-risk and, therefore, adjust the premium rates accordingly.  So a small hatchback car with a sub-1000cc engine pays the lowest third-party rate, a mid-size sedan in the 1000cc to 1500cc band pays more, and a large SUV above 1500cc pays the most.

What does Cubic Capacity Mean?

The cubic capacity of a car's engine refers to the combined volume of all the cylinders, and it is usually measured in cubic centimetres (cc). However, manufacturers often give a rounded figure in litres; thus, an engine of 1197cc is considered almost 1.2 litre. You can check the exact number on your Registration Certificate (RC), vehicle invoice, and owner's manual.

Higher cubic capacity usually implies a more powerful motor, more fuel consumption, and, for insurance reasons, a higher risk band. Insurance companies and the regulatory authority consider cars with bigger engines as being able to go faster and cause more expensive damage in an accident. This is why the price of mandatory third party insurance is higher for them.

How does Cubic Capacity Impact the Premium Rates?

A comprehensive car insurance premium has two main parts, and cubic capacity affects them differently.

The third-party  insurance is regulated with a fixed, published rate for every cc slab by IRDAI. On the other hand, the own-damage component is decided by the insurer themselves using their own rating factors, and it is not decided by cc directly. Usually, cars with higher cc have a higher IDV and they are more expensive to repair, hence the own-damage premium is generally higher for them also.

How do the CC Slabs Change your Third-Party Premium?

IRDAI determines the third-party premium rates for private cars in three cubic-capacity slabs, and the rate increases with each higher slab. The following numbers represent the IRDAI third-party structure that is most often used for private cars. IRDAI updates these rates periodically, so verify the present-year figure with your car insurance company or the IRDAI notification before buying.

The main thing is that the third-party rate is a fixed fee per slab which is determined by the regulator and not a percentage of the value of your car. That said, all insurers are required to charge the identical third-party rate for the same cc slab.

Why does a Higher CC Increase your Premium Rate?

The insurer determines the premium for own damage part, typically as a base rate on the car's Insured Declared Value (IDV). It is then changed further based on the car's age, make and model, and location. The cubic capacity affects this indirectly through three ways:

• Higher IDV: If you consider larger-cc cars, these are more likely to have a higher on-road price, and thus a higher IDV; the OD premium is a percentage of IDV.

• Costlier repairs: Bigger engines come with vehicles that have costly parts and labour, and insurers take this into account when calculating the base OD rate for the model.

• Higher risk profile: Since more powerful cars can reach higher speeds and cause larger claims, their rating can be increased.

So although cc does not determine the OD rate directly, vehicles with a more powerful car engine typically result in a larger OD premium as the elements that usually influence OD pricing also vary with cc.

What Else Changes your Premium Besides CC?

When purchasing car insurance online or during your insurance renewal, insurers consider these factors along with your vehicle's cubic capacity to calculate the final premium.

• Insured Declared Value (IDV): Your car's current market value; this is the single biggest factor that determines the own-damage premium.

• Car age and depreciation: The older the car, the lower is its IDV, and hence the own-damage premium is lower.

• Make, model and variant: The base rate is affected by repair cost and parts availability.

• Location: Usually metros and high-theft or high-accident areas are more expensive than rural areas.

• No Claim Bonus (NCB): It is a discount of up to 50% on the own-damage premium for the years without a claim.

• Add-ons: Zero depreciation, engine protection, roadside assistance, and similar covers have the effect of increasing the premium.

• Fuel type: Diesel and CNG cars may be priced slightly differently from petrol cars.

Also read: 10 Factors Which Determine Car Insurance Premium?