India has a huge used-car market primarily due to the fact that second-hand cars are more affordable than new ones. Traditionally, buying a used car meant looking for a car owner who wants to sell his four-wheeler, assessing the way he has used the car, and using the services of a mechanic to determine its value.
However, in recent years, with the introduction of digital platforms and online used-car marketplaces, it has become increasingly difficult to value a used car. When you decide to buy car insurance online for a used car, it is important to ensure that you value the car carefully, as it can have a direct impact on your insurance premium. In this article, we will talk about used car valuation and its impact on car insurance premiums.
Understanding Used-Car Valuation
The value of a car changes with its age. Used car valuation is a process that can help you determine the market value of the used car at a specific time. There are various factors that need to be taken into consideration, like depreciation, any accidents, etc.
When you buy a car insurance policy for your used car, the value of the used car is the Insured Declared Value (IDV) of the car. The IDV is the maximum sum insured by the insurance for a car. Here is a quick look at the chart that is usually used to calculate the value of a used car.
| Car’s Age | Depreciation |
| Up to 6 months | 5% |
| Between 6 months and 1 year | 15% |
| Between 1 year and 2 years | 20% |
| Between 2 years and 3 years | 30% |
| Between 3 years and 4 years | 40% |
| Between 4 years and 5 years | 50% |
For cars more than five years old, the insurer arrives at the IDV after a discussion with the car owner. The insurer gets the vehicle inspected by a surveyor before determining the IDV.
It is important to remember that higher IDV implies a higher sum insured and hence, a higher premium of the car insurance policy. While there are many providers offering cheap Car Insurance in India, they offer a low IDV and hence a low sum insured.
Choosing the IDV of Your Used Car
Many insurance providers allow car owners to choose a lower IDV for their cars to reduce the quote for car insurance premiums. While this can ensure that you get a cheaper insurance policy, it also means that in the event of the theft of your car or total loss due to an accident, you will receive a lower payout.
Factors that Affect the Premium of a Car Insurance Policy for a Used Car
Here are some crucial factors that impact the car Insurance premium of a used car:
- Age of the car
- Make and model of the car
- The area where the car is registered. If the area is prone to accidents, floods, thefts, etc., then the premium will be adjusted by the insurer accordingly.
- Fuel type of the car. Premiums for petrol, diesel, and CNG cars of the same make and model are different.
- Type of Car Insurance coverage. The premium for a Comprehensive Car Insurance policy is higher than that of a third-party liability-only policy
- Add-on covers purchased by you. While these covers help get better coverage, they also increase the premium of the Car Insurance policy.
Car Insurance is mandatory in India, even for used cars. Hence, before buying a used car, make sure that you check its history or accidents and mishaps to get a better idea of its value. Remember, when you buy a used car insurance policy, this valuation will determine the IDV and the premium of the policy.
Summing Up
Most insurance companies offer free online tools to help you calculate the premium of a used car insurance policy. These calculators estimate the value of the car to calculate the premium when you buy insurance online for a car. When you decide to buy the policy, the insurer might want to inspect the vehicle to determine its value. Make sure that you understand all the factors that are considered for old car valuation to get the maximum sum insured on your car insurance policy. Good Luck!
