Car Insurance for Small Cars vs SUVs: What Changes in Coverage and Cost?

Small vehicles such as hatchbacks and larger SUVs’ motor insurance costs mainly depend on vehicle characteristics and age. Clarity about these differences helps vehicle owners to choose insurance polices that match their vehicle category and usage patterns. In this regard, this blog discusses important factors that influence small vehicle and SUV car insurance policies.

Vehicle Categories in Motor Insurance

In Indian motor insurance, vehicles are most probably categorised on engine capacity, body type and market value. Small cars are typically known for hatchbacks due to their compact designs with lower engine capacity. On the other hand, SUVs usually feature larger engines, higher ground clearance and spacious seating capacity. These physical and mechanical differences include the way insurers evaluate the vehicle at the time of policy underwriting.

Role of Insured Declared Value (IDV)

The Insured Declared Value IDV serves as a vital element which shows the vehicle’s market value at the time of car insurance policy purchase. The higher ex-showroom prices and resale value of SUVs compared to hatchbacks result in higher IDV values. The different vehicle values determine premium costs because insurers face a higher risk with costly vehicles.

Additional Factors That Influence Insurance Cost

There are a few more significant factors apart from IDV that influence the overall cost of motor insurance for both small vehicles and SUVs. Some of these include:

Engine Cubic Capacity (CC)

The motor insurance premium is often linked with the car’s engine cubic capacity. It is the measurement of the total volume of all cylinders in a vehicle’s engine in cubic centimetres. Vehicles with larger engines are considered more powerful and capable of higher speeds, which insurers may correlate with a higher risk of severe accidents.

On the other hand, a small hatchback with about 1200 cc engine can have a significantly lower premium than an SUV with an approximate 2200cc engine.

Age of the Vehicle (Depreciation)

As the vehicle becomes older, the cost of insuring individual parts such as the plastic, rubber, fibre, and metal components increases because depreciation is applied to them during claims. For older vehicles, insurers may charge slightly higher premiums than for the new models.

Geographical Zone (Place of Registration)

India is divided into different geographical zones, based on the city’s population density and traffic conditions. Some of the popular zone categories are Zone A and Zone B. Zone A denotes metropolitan and densely populated areas and Zone B indicates small towns and rural areas. As the risk of accidents is higher in Zone A, the insurance premiums may also be impacted, depending on the location it is being used.

Voluntary Deductible

A deductible is the amount the policyholder agrees to pay at the time of making a claim. The deductibles are divided into two categories: compulsory deductible and voluntary deductible. The estimate of the deductible depends on the car insurance policy you choose.

For example, if you choose a voluntary deductible of ₹2,000 or ₹5,000, you have to pay the amount upfront at the time of making claims for incurred costs for managing damages.

Coverage Components That Remain Similar

There are four main connected motor insurance components that remain similar for both small cars and SUVs. These are as follows:

• Third-Party Liability Insurance: Third-Party Liability Insurance covers injury or damage to a third party caused by the insured vehicle and it is compulsory as per the Motor Vehicles Act, 1988.
• Own Damage Cover: The Own Damage Cover component protects the insured vehicle from damage which results from accidents, fire, theft and natural disaster events.
• Personal Accident Cover: The Personal Accident Cover provides compensation to the owner-driver who suffers injuries from an accident.
• Add-On Covers: Policyholders can select additional coverage options, which include zero depreciation cover, roadside assistance and engine protection to expand their existing protection.

Furthermore, insurers like HDFC ERGO’s motor insurance provide all of these coverages under their comprehensive car insurance. Along with that, they have more than 12,000 network garages.

Final Thoughts

Small cars and SUVs have their own functionality, so their insurance policies differ. Small cars are often referred to as compact vehicles with smaller engines and fewer parts. Because of this, they cost less and the insurer may charge a lower premium. On the other hand, SUVs are larger vehicles and they have bigger engines to give maximum power to the vehicle. As a result, they cost more, and their motor insurance premiums can be higher. To get an accurate premium estimate, use the insurer’s quote functions and get the complete insurance details.