Does car insurance go up with a new car? Here’s why!

Upgrading to a new car feels like a lifestyle shift. A statement of advancement. A choice deeply connected with technology, safety, and in many cases, financial planning. But while you may have set up your EMI, chosen the colour, and ticked off your must-have features, one aspect often unsettles buyers just after the purchase, i.e., your car insurance premium. The biggest confusion is: Does car insurance go up with a new car?

If you're wondering why car insurance always gets costlier or how is the insurance premium calculated on a new car? Then, it’s time to look under the hood at how modern car insurance actually works in India. Because behind that new-car glow is a changing risk-scape that the insurance industry takes very seriously.

Let’s discover the often-unspoken factors that drive up your premium and what it tells us about the evolution of risk and responsibility.

The uncomfortable truth: Yes, new cars usually attract higher premiums

Before we unpack the layers, let’s address the core truth. Does car insurance go up with a new car - yes, car insurance premiums for new vehicles are usually higher compared to older ones. But that’s not the whole picture. The reasons why are as complex as modern vehicles themselves. Let's see them one by one:

Reason 1: The price tag drives your IDV

A new car’s Insured Declared Value (IDV), the maximum sum insured payable in case of total loss or theft, is one of the strongest factors behind your premium. The higher the IDV, the higher the risk of exposure to insurers.

While older vehicles undergo depreciation, reducing their IDV each year, a new car comes with a clean slate and a higher risk of value.

But there’s a twist. Not all new cars will cost the same to insure. A ₹20-lakh sedan and a ₹20-lakh SUV might carry different risks depending on their parts, repair costs, and theft rates. IDV sets the ceiling, but it’s not the only structure holding your premium.

Reason 2: Safety tech doesn’t mean lower risk

Modern vehicles are now virtual computers on wheels, complete with lane assist, collision warnings, adaptive cruise control, and even AI-enabled driving assistance. Shouldn’t all this tech reduce your premium? Does car insurance go up with a new car?

Theoretically, yes. Practically, not always.

Here’s why:

·       Repair costs are sky-high: A minor bumper tap in a 2025 car could require recalibrating sensors and replacing embedded tech, shooting up repair bills.

·       Specialised parts: Longer downtime: Sourcing and fixing advanced components takes longer and costs more, increasing claim liabilities.

·       Human over-reliance: Ironically, some drivers over-rely on safety tech, leading to riskier behaviour, something underwriters factor in.

So, while safety tech might reduce accident frequency, it also raises repair complexity. Insurers are still studying long-term data to rebalance this equation.

Reason 3: New cars come with necessary add-ons 

As per IRDAI mandates and evolving road safety policies, many insurers now bundle much-needed add-ons into new car policies, especially comprehensive covers. While these offer enhanced protection, they also bump up the premium.

Here are some quietly bundled-in costs:

·       Depreciation cover: For new cars, this offers full claim value without factoring in part depreciation.

·       Engines protect cover: Particularly vital in metros prone to waterlogging.

·       Return to Invoice (RTI): Bridges the gap between IDV and the on-road price of your new vehicle.

·       Consumables cover: For newer cars, especially luxury or high-performance variants, this is recommended automatically.

None of these are compulsory. But they surely make a difference during a claim process. It comes at a price that’s reflected in your overall premium.

Reason 4: Perceived risk factors for new car owners

It might sound unfair, but insurance is about people just as much as machines. And new car buyers are demographic insurers studying closely.

·       Higher usage in initial years: New car owners tend to drive more in the first few years.

·       More highway trips: Newer cars often see longer road trips, increasing accident exposure.

·       Changing driver profiles: Younger drivers purchasing their first car or upgrading to a performance vehicle can trigger caution flags for insurers.

Many insurers, especially those using behavioural underwriting models, now assess usage patterns and demographic factors more deeply, adjusting risk scores accordingly.

Reason 5: Higher theft probability 

One would think that new cars with immobilisers, GPS tracking, and smart locks are less likely to be stolen. Not always.

Organised car theft rings increasingly target newer models for:

·       Parts cannibalisation: Modern vehicles fetch more for their spare parts.

·       Cross-border smuggling: This happens especially for luxury cars with great performance.

·       VIN cloning and resale scams: A growing menace in India’s grey market.

This perceived spike in theft risk, especially for high-end or in-demand models, adds to your comprehensive premium, even if you never make a claim. 

Brand or model: Does car insurance go up with a new car?

Absolutely, not just for your car's value, but also for its reputation. Insurers work with actuarial data that breaks down accident frequency, repair cost, and claim history per make, model, and even variant. For instance:

·       A new compact SUV with a history of expensive rear bumper repairs might attract a higher premium than a sedan of the same value.

·       Some brands have easier spare parts access or standardised repair networks, reducing long-term claims costs.

So yes, your choice of car, even within the same segment, can tilt your premium up or down.

Why premiums can vary even between two new cars of same value

Two new cars, same price, same fuel type, yet wildly different premium. How is the insurance premium calculated on a new car? Here’s a deeper breakdown:

·       Material complexity: A car with aluminium body panels vs. one with high-tensile steel impacts repair bills.

·       Transmission type: Automatic cars often attract higher repair bills.

·       ADAS (Advanced Driver Assistance Systems): The more sensors and AI involved, the greater the post-accident costs.

·       Drive type: AWDs or 4x4s typically involve more intricate drivetrain parts.

·       Import vs. domestic assembly: CBUs attract higher premiums due to part availability issues.

Bottom line 

So, does car insurance go up with a new car? The blog sums up all of it. It’s not just the newness that raises the price; it is also the added complexity. But if you’re aware of the why, you can better manage the how, through smarter add-on choices, insurer comparisons, and risk-aware ownership. It’s about how you drive it, where you live, what it’s made of, and what kind of future you’re gearing up for.