How to Lower Your Vehicle Insurance Premium Without Sacrificing Coverage?


How to Lower Your Vehicle Insurance Premium Without Sacrificing Coverage

Vehicle insurance is mandatory in India without which you might have to pay a fine or face imprisonment or both. Vehicle insurance has two sections: Own damage and Third party. Third party premium is decided by the Insurance Regulatory and Development Authority of India and is the same across all insurance companies. On the other hand, own damage premium can be fixed by insurance companies subject to the ceiling imposed by IRDA. So, if you want to reduce your vehicle insurance premium without sacrificing the cover, it would be possible only with the own damage section as the third party premiums cannot be tampered even by the insurance company. 

Here are the ways in which you may reduce your vehicle insurance premiums without sacrificing your coverage. 

  1. Compare & Buy: The first and foremost thing which doesn’t require much time is to compare and purchase vehicle insurance policy. When you compare the premiums between insurance companies, you might have an option to even negotiate with the insurance company to further reduce the premium. Some insurance companies offer high discounts on certain models whereas some others offer high discounts on other models. It might not be possible for every insurance company to offer discounts on the same model or for that matter every model. The discounts offered by insurance companies depend on the loss ratio of that particular model. For this reason, if you check with only one insurer then you might not have a chance to reduce the premium. Therefore it is advisable to check with more than one insurer before making a vehicle insurance purchase decision. This is the best way to find the insurer who can offer the lowest premiums without compromising on coverage.
  2. Choosing the appropriate IDV: The Insured Declared Value of the vehicle is the value based on which the premium for the vehicle is calculated. Earlier every Insurer would depreciate IDV by a certain percentage at the time of renewal. This practice ensured that the IDVs offered by most Insurers used to remain uniform. But these days you can find insurers offering different IDVs. As a Customer what you need to understand is what is the IDV that you should insure your vehicle for? To understand this, you need to understand the fact that IDV is the maximum liability of the Insurer i.e. the Insurer would not pay claims beyond the IDV for a policy. Also, claims where the Insurer is paying the IDV would be cases of total loss which could either be because of a burglary or your vehicle suffering damage where it is better sold as scrap. Both of these are extreme cases. It is therefore prudent to choose your IDV wisely. Because your IDV would decide the premium you would have to pay.
  3. Deductibles: The other way to reduce the vehicle insurance premium is to opt for deductibles. Deductibles also known as excess refers to a percentage of claim amount that has to be borne by the insured customer. Deductibles in a sense transfer a part of the responsibility to the insured customer. Deductibles are of two types: Compulsory/ Mandatory and Voluntary. Every vehicle insurance policy comes with a mandatory deductible that could go up to Rs.2500 depending on the cubic capacity of the vehicle. On the other hand, voluntary deductible can be chosen by the insured to reduce the premium without affecting the cover. Higher the voluntary deductible, lower would be the premium. But, higher voluntary deductible translates to greater responsibility on the insured customer. It is to be noted that voluntary deductible would be in addition to the compulsory deductible. 
  4. Delete unnecessary add-ons: The other important thing to do in order to reduce vehicle insurance premium is to delete the unnecessary add-ons. For instance, there are many add-ons available for vehicle insurance customers and you need not opt for every add-on as it would unnecessarily increase your premium. Instead you may decide to choose add-ons based on your requirements. For example, if you are residing in a hilly area, the chance of floods damaging your vehicle are low. In such cases, it would be better not to take the engine protection cover. This logic should be applied carefully based on the situation in your area. Similarly, for older vehicles there would be less need to take add-ons as the Insured declared value for old vehicles would reduce drastically. 
  5. Delete PA cover: Every vehicle insurance policy would be accompanied by a mandatory personal accident policy that compensates the insured or their family members in case of death or disability. The mandatory PA cover has a sum insured limit of Rs.15 lakhs and would be given to the owner of the vehicle in whose name the vehicle is registered and the policy is issued. But, if you have more than one vehicle, it is not necessary to take PA policy for every vehicle. Instead, you may choose to take a single personal accident policy for all your vehicles registered in your name. This way you may reduce a certain amount of premium payable without compromising on the coverage in your vehicle insurance.


  1. What is the validity of a motor vehicle insurance policy?

    A motor vehicle insurance policy is valid for a period of 12 months or 1 year from the policy start date. It is also possible to take long term vehicle insurance plans for 2 or 3 years at a time for the third party component of the policy. All the addons under the motor vehicle insurance policy would be valid only for the policy period mentioned in the policy.

  2. Can I take two vehicle insurance policies for one vehicle?

    Yes. You may choose to take more than one vehicle insurance policy for your vehicle. But, there would be no use of taking more than one vehicle insurance policy as you cannot claim from 2 policies in case of loss or damage to your vehicle or a third party claim. If you have taken a second policy without the knowledge of the first policy, then it is advisable to cancel the second policy as the first policy would continue the policy dates of previous policies.

  3. What is IDV in vehicle insurance?

    IDV also known as Insured declared value is the sum insured declared by the insured and agreed by the insurance company for insurance purposes. IDV is the maximum limit of liability the insurers would be responsible for in case of a loss or damage to the insured vehicle.

  4. Up to what age of the vehicle should add-ons be taken?

    Most insurance companies offer add-ons up to an age of 7-8 years. There are certain add-ons that are offered only for 1-2 years and other add-ons that are offered for 7 years. In any case, you may decide to take add-ons based on your requirements. 

  5. Is it possible to have mid term addition of add-ons in vehicle insurance policy?

    No. It would not be permitted to have mid term addition of add-ons in a vehicle insurance policy. If you want to include add-ons in a vehicle insurance policy mid term, then you should cancel the policy and issue a new policy after carrying out necessary inspections of the vehicle.

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Susheel Agarwal