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Insurance for New Car Versus Used Car

By Admin
13 May 2022, 1:05 PM

Car insurance is mandatory as per law irrespective of whether one owns an old or new car. Different car insurance plans come with different features available at attractive prices and the best way to find a good package that offers financial security for your car is by putting inadequate research.

Interested to learn more about insurance policies available for old and brand-new cars alike?

Read this article to know more!

Major Differences Between Insurances for Both Kinds of Cars - Old and New

BasisNew car insuranceOld car insurance
PremiumThe part of the premium corresponding to IDV is higher than that of used cars. But overall, as the car presents fewer risks, the premium rates will be lesser.The part of the premium corresponding to IDV is lower than that of new cars. But overall, as the car presents more risk to the insurer, the premium rates will be higher.
IDVWill have a higher IDV than that of used cars.Will have a lower IDV than newer counterparts.
Quality of spare parts and safety devicesThe quality of the spare parts would be better.The quality of the spare parts would be lesser.
Health of the carRepair of new vehicles cost more. It is cheaper to repair used cars.

The following parameters though indicative will provide an excellent insight into how one must go about choosing an insurance plan for his or her car –

Choose between comprehensive and third-party liability cover

The benefits that accrue out of third-party car insurance are as follows –

  • Helps the insured drive legally on the roads and by extension free them of any adverse legal repercussions. For example, it protects the pocket from hefty penalties or traffic fines.
  • It has a very quick and easy process for purchase.
  • The coverage offered is affordable.
  • It prevents the insured from facing any financial stress arising from an unforeseen incident.

But such coverage is limited and does not cover for own damages, nor does it offer protection for the automobile from natural disasters, theft, damage caused by third parties, riot damage, arson or vandalism, etc.

If one wishes to get insured for all these eventualities and also avail the option of add-ons such as engine protect cover, road assistance, etc, then one must opt-in for a comprehensive insurance cover, over a third-party cover.

Choose the right add-ons

The add-on covers are what clearly distinguish one policy from another. Insurance companies may offer a range of add-ons such as zero depreciation cover, consumables cover, return to invoice cover, engine and tyre protection cover, roadside assistance, passenger cover, etc.

One must opt for a policy that caters closest to all the needs of the insured. Generally, there are no limits to the number of add-ons that can be purchased, but it is advisable to choose only those add-ons that enhance one’s coverage.

See if the final premium price is acceptable to you or not

The zone in which the car is registered plays a crucial role in determining the premium. For the purpose of premium calculation, India is divided into two zones, namely Zone A and Zone B.

Zone A - This includes 8 cities, namely, New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Ahmedabad. These are so categorised as the vehicles in these cities are more prone to risks arising from heavier traffic and higher population.

These areas also have a higher incidence of theft and accidents. The car insurance premium in these areas is calculated as follows (considering that the age of the car is constant) -

Age of vehicleFor cubic capacity less than 1000ccFor cubic capacity between 1000cc and 1500ccFor cubic capacity more than 1500 cc
When the car is less than 5 years old3.127% of IDV of the car3.283% of IDV of the car3.440% of IDV of the car
When the car is between 5 and 10 years of age3.283% of IDV of the car3.447% of IDV of the car3.612% of IDV of the car
When the car is above 10 years of age3.362% of IDV of the car3.529% of IDV of the car3.698% of IDV of the car

Zone B - This zone includes the rest of India barring the 8 cities in Zone A. The premium rates in this zone are comparatively lesser than Zone A cities and are calculated as follows- 

Age of vehicleFor cubic capacity less than 1000ccFor cubic capacity between 1000cc and 1500ccFor cubic capacity more than 1500 cc
When the car is less than 5 years old3.039% of IDV of the car3.191% of IDV of the car3.343% of IDV of the car
When the car is between 5 and 10 years of age3.191% of IDV of the car3.351% of IDV of the car3.510% of IDV of the car
When the car is above 10 years of age3.267% of IDV of the car3.430% of IDV of the car3.596% of IDV of the car

Please note: The IDV is the Insured Declared Vehicle of the car i.e. the market value of the car used for premium calculation.

One must look into the rates mentioned above and see which of these is applicable to the car that they own. Additional factors, such as the model and make of the car, the area that it was purchased, etc will vary the premium amount.

The car owner must factor all of these in and then only see if the premium amount is firstly affordable, secondly viable, and lastly worth giving. 

Compare online

With information available at our fingertips, it becomes very easy to compare the different policies available with the details provided on the website of the insurance company or on neutral third-party websites.

Carefully peruse the terms and conditions of the policy and in case any legalese or terms are difficult to comprehend, reach out to the insurer, a legal expert, a friend, or even google.

The claim settlement ratio of the company must also be checked online as it will affect the probability of one getting their claims settled by the insurance company. Also, read the various reviews and feedback given online to get a clearer picture about a particular policy or an insurance company whose services you wish to avail.

Fix the Insured Declared Value after due consideration

The Insured Declared Value (IDV) is the maximum amount that the car insurance company has to offer to the insured in case an eventuality covered in the policy were to occur. IDV consists of the value of the car including the accessories fitted but does not cover the cost of registration or insurance of the vehicle. 

Efforts must be made to get an IDV closest to the market value of the car. Lowering the IDV just to lower premium rates might prove counterintuitive as the compensation amount will not be commensurate with the costs incurred.

Buy Insurance Policy by Understanding the Usage of the Car Ask these Questions to Get an Idea

  • Is the car for daily use?
  • Will you drive the car frequently within the city, possibly long rides?
  • Do you go on inter-state road trips regularly?
  • Is this your only car? (as commercial cars and cars used for private purposes have different policy covers).
  • Will it be only you that drive the car? (as one can determine whether he or she must get fleet insurance).
  • Will other people seated in the car drive it besides you? (this will be helpful in determining whether you should opt-in for add-ons such as passenger cover to ensure that medical expenses that may be incurred due to injuries to the passengers in case of an accident will be covered by the insurer).
  • What is your previous driving record? (this will help you determine how extensive one’s coverage should be in terms of a comprehensive cover versus a third party liability insurance only or opting in for add-ons such as road assistance, passenger protection, etc).
  • Can your locality get flooded? (water ingress can be a major reason for damages to the engine, therefore, factoring in this will be of utmost importance in determining one’s overall coverage).
  • Is your locality prone to car theft?
  • Does your locality have a history of rioting?

Conclusion

The car insurance sector is a market of promises. Each new policy offered only seems better than the previous one. The only way to know if a particular policy is the right fit is by doing sufficient background research about it and understanding the terms and conditions in the policy document.

Having car insurance is essential, and you can decide what kind of car insurance he or she can use to protect his or her prized possession.

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