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Everything You Need to Know About Car Valuation and Insurance

By Juhi Walia
23 September 2022, 11:30 AM

Cars are like any other machinery. Unfortunately, they are also prone to constant wear and tear, leading to a reduction in the overall value of your vehicle. This process of wear and tear is called depreciation. Even if you maintain your car perfectly and get it serviced regularly, depreciation is inevitable. The depreciation would mean the insured declared value (IDV), the maximum amount payable in case of an insurance claim, decreases over time.  However, you should know that the extent of depreciation-based IDV reduction depends on several factors.

You can make an appropriate selling or purchasing decision with the right price. With the help of a used, second-hand car valuation, you can easily calculate the current resale value of your vehicle. In this article, we will talk about second-hand car valuation and how car insurance is affected by it.

What is Used or Second-hand Car Valuation?

When a new vehicle is purchased from a showroom, it becomes a second-hand or used vehicle. 

Hence, used or second-hand car valuation refers to the process that can help you determine the accurate and exact value of such a car. 

Several factors affect the value of a used or second-hand car, such as: -

  • The history of accident(s)
  • Service history
  • Depreciation
  • Make/model
  • Mileage

The more aged the vehicle is, the more the depreciation; for this reason, the vehicle value decreases due to the increased depreciation. The determined value after the second-hand car valuation in comprehensive car insurance is nothing but the IDV. 

An IDV is a car's market value calculated after considering the abovementioned factors. IDV is highly critical in car insurance as it is the highest sum insured (SI) amount. IDV helps determine the worth of your vehicle, and it is always necessary to declare the accurate value of a second-hand car.

Given below is the table to learn about the depreciation imposed on used, second-hand cars:

Vehicle AgeIDV Depreciation (%)
Up to six months5%
6 months - one year15%
1-2 years20%
2-3 years30%
3-4 years40%
4-5 years50%

How is Car Insurance Affected by the Used Car Valuation? 

Knowing the accurate car value is highly critical. The insurance provider calculates the premium based on the vehicle's value. In simple terms, the vehicle's IDV affects the premium of the best car insurance.

Whether you want to buy a used car or sell it, the used-car valuation has implications for a car insurance policy. Given below are the different impacts of used, second-hand car valuation on insurance under varying scenarios:

For a Buyer 

When you buy a second-hand car, check if it has a comprehensive car insurance policy to protect it. Also, check the IDV figure in your insurance certificate. It will allow you to determine if the owner has declared the appropriate car value according to the current market value. 

Sometimes, people intentionally decrease the car's IDV while purchasing a car insurance policy. It may be profitable in the short term but may become a problem when you apply for a total loss or damage claim. Due to the incorrect IDV, your car insurance policy company may not pay your vehicle's real and actual value. 

For a Seller 

If you are selling your car at the lowest cost to reduce the car insurance premium, you will be missing out on the profits you can earn in the long term when selling the four-wheeler. Another drawback of underpricing a vehicle is that you will get a lower car insurance claim amount because of the lower value declared in the insurance policy. 

Transferring Car Insurance Plan/ Policy 

When a car owner plans to sell his/her used vehicle with an active insurance policy, the vehicle's seller must inform the insurance provider about the vehicle's sale. The seller must also mention all facts and provide the insurer with a written letter containing the car details. There comes the fee which the seller needs to pay to the insurer after deducting the car insurance NCB. The fee must be paid from the transfer date till the insurance policy's expiry. 

What Factors Affect the Second-hand Car Valuation? 

As said earlier, various factors affect second-hand car valuation, such as:

  • Mileage: It is critical for an individual to always check the total distance the car covers. It is among the essential factors in evaluating second-hand cars.
  • Make and Model: If your used car is discontinued, it will be challenging to procure spare parts. A discontinued model can be costly to own due to expensive spare parts.
  • Vehicle Registration Details: One should check whether the car is hypothecated. You should also check the ownership details of a used vehicle. Do not forget to check whether the RC's chassis number is the same as the vehicle number.
  • Service History: Check whether the vehicle has been serviced on time at the reputed service centre. A car serviced regularly will be in decent condition and can provide you with higher value.

How Does an Insurance Provider Determine Car's Value in India? 

It is said that the primary factor for calculating your car insurance premium is the vehicle's value. If a car is costly, it will also be expensive to buy an insurance policy for the said vehicle. For this reason, you should look at the cost of purchasing a car - the ex-showroom price, registration costs, and insurance.  


Knowing the accurate used-car value is critical for both the buyer and the seller. Ensure to evaluate and inspect the used car accurately to prevent future losses when closing the deal. Remember - the used-car value will directly affect the insurance cost, and you should not provide an incorrect quote while buying a comprehensive car insurance policy. 

Read more -


1. How to enhance the used car valuation?

You must keep your car in excellent condition for an effective valuation price. You can ensure that:

  • The interior and exterior are clean.
  • Your vehicle is regularly serviced

2. How can a car valuation calculator help?

The car valuation calculator can help sellers and buyers determine the car's appropriate value. By adding essential information about the vehicle to the car valuation calculator, you can determine the accurate second-hand car value. 

3. What are the important factors that determine the IDV?

The car valuation factors that determine the IDV include:

  • The vehicle's physical condition
  • Accident history
  • Mileage
  • Service history
  • Model

4. Does a brand-new car suffer from depreciation?

Yes, the brand-new car will suffer a 5% depreciation of its ex-showroom costs following its purchase. The more aged the vehicle gets, the more depreciation it experiences.

5. Are IDV and car valuation the same?

Yes. IDV refers to the maximum amount you can claim from your insurer if your car gets stolen or damaged beyond repair. So, it is a crucial metric of car valuation.

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