The document of a motor insurance policy lists the terms and conditions, inclusions, exclusions and the add-ons among others offered by your plan. Along with these, another vital detail mentioned upfront is the premium that you need to pay to avail the policy benefits. How do insurance companies arrive at this number?

There are many factors which go into determining the premium which includes the vehicle’s model, cubic capacity, age, etc. Also, for the same vehicle with similar cubic capacity (CC), an insurer can charge two varying amounts as premium. This is because location is one of the many factors, depending on which the premium amount is calculated. Let’s learn more.

Premium depends on geographical location

Note that the premium you pay for your motor insurance is influenced by the geographical location and is charged as a percentage of the insured declared value (IDV). IDV is the vehicle’s market value.

Considering your geographical location and the corresponding possibility of vehicle loss or damage, insurers calculate the premium amount. Thus, motor insurance premiums are higher in regions that are more susceptible to accidents, thefts and vandalism.

Two insurance zones in India

In India, there are two insurance zones – Zone A and Zone B. Zone A consists of eight cities including New Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Zone B comprises rest of India.

Motor insurance premium is higher in the eight cities belonging to Zone A. This is because these cities have a higher population and heavy traffic, thus exposing your vehicle to more risks.

Motor insurance rates for different zones

The table given below outlines the motor insurance rates for the aforementioned zones based on the vehicle’s age and engine capacity:

Premium rates for Zone A

Age of the vehicle Less than 1000 CC Between 1000 - 1500 CC Above 1500 CC
Less than 5 years 3.127% of the IDV 3.283% of the IDV 3.440% of the IDV
5 to 10 years old 3.283% of the IDV 3.447% of the IDV 3.612% of the IDV
Above 10 years 3.362% of the IDV 3.529% of the IDV 3.698% of the IDV

Premium rates for Zone B

Age of the vehicle Less than 1000 CC 1000 - 1500 CC Above 1500 CC
Less than 5 years 3.039% of the IDV 3.191% of the IDV 3.343% of the IDV
5 to 10 years old 3.191% of the IDV 3.351% of the IDV 3.510% of the IDV
Above 10 years 3.267% of the IDV 3.430% of the IDV 3.596% of the IDV

So, the next time you switch cities, note that your motor insurance premium may also see a change.

Click here to apply for a motor insurance.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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