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How to calculate First Party Premium in Car Insurance?

Car insurance policy has two sections namely First party/ 1st party section and Third party section. With the introduction of long term motor insurance policies it is possible for the customers to take stand alone first party car insurance or own damage insurance. Prior to the introduction of long term motor insurance it was not possible for the customers to only opt for first party insurance, every car which ply in public place has to be insured for third party and therefore a motor insurance policy would contain both the first party and third party insurance.

The premium for first party in car insurance is decided by the insurance company within the limits set by the IRDA. IRDA decides on the third party premium rates which are subject to change every year depending on the previous year loss ratio, GWP collected etc. The first party premium rates differ from company to company and depend on many factors such as the cubic capacity of the car, place of registration, make and model of the car, age of the car, additional coverage required etc. Most of the companies decide on the first party premium based on the loss ratio available for that particular model and hence some companies may charge heavy premium for your car while some companies may charge less premium.

What is First Party Premium in Car Insurance?

As discussed above an insurance policy consists of two sections namely; First party and Third party. Insurance is a contract between the customer and the insurance company where the insurance company agrees to settle the claims of customer due to an insured peril in return for a specified amount known as premium. In the insurance contract insured person is known as the first party and the insurance company is known as the second party. The insurance company provides coverage to the insured property i.e. CAR, against insured perils and hence the name first party car insurance.

The first party car insurance in short covers the loss or damage to the insured customer’s car due to an insured peril acting at the time of accident. The first party car insurance can be taken as a Stand-alone cover if your car is already insured against third party loss or damages.

The first party car insurance is not mandatory as per the Indian motor vehicles act and is at the discretion of the customer to purchase it.

Coverage under first party premium:

First party premium insurance covers the loss or damage to the property (car) of the first party (insured) due to an insured peril at the time of accident. The list of perils covered under the first party car insurance is mentioned below:

  • Loss or damage to the car due to Fire
  • Loss or damage due to Natural catastrophes such as Cyclone, Typhoon, Earthquakes, Storms etc.
  • Loss or damage to the car due to road side Accidents
  • Loss or damage to the car due to manmade disasters such as Strike, Riot and Malicious damage.
  • Loss or damage to the car due to any other unfortunate event not caused deliberately.

First Party Premium Calculation:

First party premium rates are decided by the insurance companies and are very competitive in the insurance market due to the high number of insurance companies offering the product. The premium for first party is calculated by the insurance companies using the below table:

Description Condition Premium
Basic First party premium As fixed by the insurance company Rs.40000
Less: Company discount 70% -(Rs.32000)
Premium after company discount   Rs.8000
Less: Anti theft device discount 2.5% up to Rs.500 -(Rs.200)
Premium after anti theft device discount   Rs.7800
Less: Automobile Association of India (AAI) discount 5% up to Rs.200 -(Rs.200)
Premium after AAI discount   Rs.7600
Less: No Claim Bonus discount 20% -(Rs.1520)
Final First party Premium after discount   Rs.6080
Add-ons Bumper to Bumper, Consumables, Road side assistance, Invoice cover, Key protection etc. +(Rs.10500)
Final First Party premium including add-ons   Rs.16580
  • The others factors deciding the premium of car insurance is the age of the car. Age of the car is divided into three types; Less than 5 years, More than 5 years and Less than 10 years, More than 10 years. The first party premium is decided by the insurance companies based on the age of the vehicles. Few insurance companies offer high discounts for new vehicles and vehicles aged above 5 years.  Few insurance companies offer good discounts for vehicles below 5 years and vehicles above 10 years. All this depends on the loss ratio of the car in the previous year where the loss ratio is also calculated age wise.
Age of the CAR Less than 5 years
More than 5 years and less than 10 years
More than 10 years
  • Another factor deciding the first party premium is the Place of registration of the Car. All the RTOs are classified into two zones; Zone A includes all the Metro cities and the state capitals while Zone B includes all places other than those in the Zone A.
  • The cubic capacity of the car also decides the premium of your car insurance policy. Cubic capacity can be defined as the size of the car with related to the engine capacity. Higher the cubic capacity, higher would be the size of the engine of the car. Bigger the engine, higher would be the performance of the car. The cubic capacity is divided into three types for insurance purpose; Cars with cubic capacity less than 1000cc, cars with cubic capacity exceeding 1000cc and not exceeding 1500cc, cars with cubic capacity exceeding 1500cc. The third party premium and first party premium depends on the cubic capacity of the car. Higher the cubic capacity of the car, higher would be the premium of your car insurance policy.
Cubic Capacity Less than 1000cc
More than 1000cc and less than 1500cc
More than 1500cc
  • The first party premium of your car insurance policy can be reduced by installing an anti theft device approved by the ARAI. The premium can be reduced 2.5% or up to Rs.500 whichever is lower. Anti theft devices help in reducing the theft of cars as burglars prefer cars without anti theft devices.
  • Also the first party premium can be reduced by taking the membership from the Automobile Association of India. Insurance companies offer discounts of 5% of the first party premium or Rs.200 whichever is lower.
  • Also for car insurance calculation can be used to reduce the premium if you opt for higher voluntary excess or deductible. The higher deductible you opt for, the lower would be the premium. Voluntary deductible is the amount of claim which you would bear at the time of claim settlement.

For best first-party car insurance premium rates at the time of renewal please click on the link Car Insurance and get the cheap car insurance rates, where we have a dedicated team of agents to assist you with your first party insurance requirements.

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