All car owners need to buy car insurance as it is a legal mandate. It is important to understand that car insurance comes in two parts – the first is compulsory third-party insurance and the second component is the own-damage policy, which is optional.
You may choose a standalone own-damage policy, or you may invest in a comprehensive car insurance policy that includes both own-damage and third-party components. When it comes to car insurance premiums, you have a scope to reduce premium costs (other than third-party policy) based on a few strategies, which are discussed below.
1. Ensure Timely Policy Update
You must renew your policy on a timely basis, as a delay in policy renewal can result in an increase in your policy premium. Renewing a lapsed policy generally comes with a higher premium amount. Also, you will not be able to claim the No Claim Bonus if you delay renewing your policy.
A timely renewal is more than just a formality; it’s a signal of financial discipline and responsibility to your insurer. When you renew early, you avoid administrative lapses, last-minute panic, or potential break-in inspection costs. Most insurers allow renewals up to 90 days before the policy expiration date, so setting a reminder well in advance can save you a surprising amount.
Pro Tip: If your policy has already lapsed, don’t panic, but act quickly. Some insurers offer a short grace period (usually 7–30 days), during which the vehicle can still be reinsured after inspection. The sooner you initiate renewal, the less risk you face of losing accumulated benefits.
2. Compare Quotes and Purchase Policy Online
It is important to compare quotes from different insurers online. To simplify this process, you can take advantage of the free car insurance calculator that the insurers provide on their websites. Moreover, once you have selected an insurance company, consider purchasing the insurance policy online, as some trusted insurers offer discounts on premiums for purchasing their policies online.
Online comparison isn’t just about finding the cheapest plan, it’s about understanding value. When you compare quotes:
- Look beyond the base premium. Examine inclusions, exclusions, deductibles, and claim settlement ratios.
- Use licensed aggregators or insurer websites directly. These ensure accuracy and protect you from misleading third-party intermediaries.
- Watch for seasonal or digital-only discounts. Many companies now offer up to 10% premium savings for policies purchased directly through their online portal.
By spending just half an hour comparing three or four options, you could easily save a few thousand rupees per year.
3. Choose Add-ons That Are Necessary
Another way to bring down your policy premium amount is by opting for only those add-ons that are required for your car. Add-ons act as extra shielding but at extra expense, so choose them wisely. Carefully evaluate your vehicle’s specific needs and avoid unnecessary add-ons that might increase costs without providing real value.
For instance:
- Engine Protect Cover is useful for cars in flood-prone areas.
- Zero Depreciation Cover is ideal for new or luxury vehicles.
- Roadside Assistance can save you in emergencies, especially for long-distance drivers.
However, buying every available add-on can quickly bloat your premium. The goal is balance, protect what truly matters, and skip the rest. Before your next renewal, review past claims and ask: “Did this add-on actually help me?”
4. Consider Voluntary Deductibles
For a lower car insurance rate, opt for voluntary deductibles. The deductibles are paid from your pocket instead of the insurer, and the higher the deductibles are, the lower your premium cost will be.
There are two points to remember before opting for such deductibles:
- You should be a good driver who takes extra measures to avoid accidents during the policy period.
- You don’t have a history of making claims for small incidents.
Adding a voluntary deductible not only lowers your premium but also signals confidence in your driving habits. However, it’s a double-edged sword, don’t overcommit to a high deductible you might struggle to pay during a claim. A moderate balance works best, like ₹2,000–₹5,000 for mid-range vehicles.
5. Refrain from Making Minor Claims
One great way of reducing car insurance is to avoid making claims for small incidents that you can afford to pay from your end. This way, you can ensure that you retain the NCB discount on your premium amount at the time of renewing your policy.
Moreover, you also build a track record of responsible driving, which can further enhance your eligibility for better deals in the future.
Why does this matter? Because the No Claim Bonus (NCB) can reduce your premium by 20% to 50% over consecutive claim-free years. For example, if your annual premium is ₹15,000, a 50% NCB saves you ₹7,500, far more than the cost of repairing a small dent yourself.
Think long-term. Sometimes paying for a small scratch today means a cheaper renewal every year that follows.
6. Other Ways to Reduce Car Insurance Premiums
Opt for Pay-as-you-drive Cover – If you don’t drive frequently, you can use this add-on to lower your premium cost.
Install Anti-theft Devices – Installing anti-theft devices lowers the risk of your car being stolen, and insurers reduce premium costs for this reason.
Become a Member of an Automobile Association – This is another way to get a discount on your policy premium amount.
Beyond these basics, there are small yet powerful tactics that most car owners overlook:
- Keep your car parked safely: Cars parked in secure garages attract lower premiums compared to street parking.
- Bundle multiple policies: Insuring your home, bike, or health with the same company often qualifies you for loyalty discounts.
- Avoid policy gaps: A gap longer than 90 days can reset your NCB benefits entirely.
Each small adjustment adds up, turning your policy into a more cost-efficient investment.
7. Maintain a Clean Driving Record
Your driving behavior directly impacts your insurance rate. Insurers now use telematics or claim histories to assess how safely you drive. Speeding fines, reckless driving charges, or multiple minor accidents can raise your risk profile, and therefore, your premium.
To maintain a low rate:
- Follow traffic rules and avoid speeding tickets.
- Attend safe-driving programs offered by insurers; some reward completion with discounts.
- Limit young or high-risk drivers listed under your policy, as their driving history can influence your rate.
Remember, insurers reward predictability and discipline. Being accident-free for consecutive years not only saves you money but also improves your standing with your insurer for faster, smoother claim settlements.
8. Know When to Switch Insurers
Loyalty is good, but blind loyalty can be expensive. If your insurer has gradually raised premiums without new benefits or if customer service has declined, it might be time to switch.
Before switching, evaluate:
- Claim settlement ratio: Aim for 90% or higher.
- Network garages: A wider network means easier cashless claims.
- Customer reviews: Check real experiences with claims and service quality.
A fresh insurer may offer first-year incentives, better NCB retention, or even policy portability options that honor your previous claim-free history. Just ensure there’s no break between old and new coverage.
9. Understand IDV (Insured Declared Value)
The Insured Declared Value (IDV) is essentially your car’s current market value, the maximum amount your insurer will pay in case of total loss or theft. The higher the IDV, the higher your premium.
However, setting the IDV too low can hurt you during a claim, while setting it unrealistically high only increases your cost. The right approach is to align your IDV with your car’s depreciated market value, typically:
- 5–10% depreciation in the first year
- 20% after two years
- 30% or more after three years
If you drive an older vehicle, a slightly lower IDV might make sense to avoid overpaying for coverage you may never fully use.
Conclusion
The key to knowing how to reduce premium costs lies in making smart decisions and having a better understanding of what influences premium rates. Treat your car insurance as a living policy, one that evolves with your driving habits, car’s age, and usage.
Regularly reviewing your policy, cutting out unnecessary add-ons, and practicing safe driving can easily reduce your annual premiums by 20–40%. Keeping these strategies in mind will not only help you save money but also give you peace of mind knowing that you’re covered efficiently and affordably.
