How is the Premium for a Brand-new Car Determined?

1. Type of Car Insurance You Choose

The first factor is the kind of policy you pick:

1. Third-Party Insurance: This is the legal minimum required in India. It covers damage or injuries caused to other people or their property. Since premiums are fixed by IRDAI, it is usually cheaper.
2. Comprehensive Insurance: This policy covers both third-party damages and your own car in case of accidents, theft, fire, or natural disasters. Naturally, the premium is higher, but it provides full protection for your new car.

For most new car owners, a comprehensive policy is the smarter choice as repair costs for new cars are often high.

3. Engine Capacity (CC)

Engine size is another key factor. Cars with bigger engines are more powerful and are generally seen as higher risk. Insurers charge higher premiums for such vehicles because repairs are more expensive and accidents can cause more damage.

For instance, a 1200cc hatchback will cost less to insure than a 2000cc SUV. High-performance engines, especially in sports cars, attract even higher premiums due to the increased risk on the road.

5. Optional Add-Ons

Comprehensive policies allow you to include add-ons, which improve coverage but increase the premium slightly. Common add-ons include:

• Zero Depreciation Cover: Ensures you get full replacement cost for parts without considering depreciation.
• Engine Protection Cover: Protects your engine against damage caused by water, oil leaks, or accidents.
• Return-to-Invoice Cover: Helps cover the full cost of your car, including registration and taxes, in case of total loss.
• Roadside Assistance: Covers towing, on-spot repairs, and emergency help in case of breakdowns.

While add-ons raise your premium, they can save you substantial money in repairs or replacement costs, especially for a new car.