At the time of a car purchase, cost is definitely one of the factors that you would consider before exploring the different options in the market. You would have a budget in mind for the purchase and you would be looking to get the best value for your money. You should also consider the cost of car insurance, as this is one of the most significant expenses that you would have to bear as a car owner.
With the growth in the used car market in India, it has become possible for people to procure the vehicle of their choice at a fraction of the cost. The procedure for buying a used car and its insurance is also hassle-free. You should know that there is a distinct difference in the cost of insuring a used vehicle and a new car.
Car Insurance Premium For New Vehicles:
You may be of the opinion that the cost of insurance for new cars are higher than that of old cars. This would seem logical, as new cars have higher market value. Some of the new vehicles may also be more expensive to repair due to the lack of availability of spare parts. However, the insurance cost of new cars are not always higher than that of old cars. There are several factors that are taken into consideration when the insurance company performs the underwriting. These factors may result in car insurance premiums that differ significantly from the base rates.
Car Insurance Premium For Used Vehicles:
If you stay in a theft-prone area, your car insurance rates will be higher. If your car has the latest security devices, your insurance premium amount will be lower. The fact that new cars are equipped with ample safety features drives down the insurance premium for these vehicles. When buying a car, you should pay special attention to the make and model, as some types of cars are highly prone to theft. This applies for the same model of used vehicles as well.
You should keep in mind that new vehicles are not targeted by thieves very often as they have a robust security system. Also, it is easier for thieves to disassemble older cars and sell the parts for profit. So, if you are planning to buy a used car, ensure that you equip it with a comprehensive car insurance policy for extensive protection.
So, here is a summary of the points discussed above:
|New car insurance||Used car insurance|
|New cars have a higher Insured Declared Value (IDV). So, the part of the premium corresponding to IDV is higher than that of used cars.||Since the IDV of used cars is lower, the premium corresponding to this component is lower.|
|New cars will have the latest safety devices. So, these vehicles pose low risk with respect to theft. The component of the insurance premium corresponding to this factor will be lower.||Used cars are targeted by thieves more often as these vehicles do not have a robust security system.|
|Repair of new vehicles cost more. So, insurance charges could be slightly higher.||It is cheaper to repair used cars.|
|New cars are not prone to breakdowns and other such unexpected events that result in heavy expenses. This contributes to a lower insurance premium.||Old cars are highly prone to breakdowns and total loss situations. This implies that the premium could be higher.|
How Much Coverage Is Too Much?
At the time of purchase of a new car, you should ensure that you buy only the necessary coverage. This will help you in keeping the insurance rates to a minimum. The Motor Vehicles Act, 1988, mandates that all cars are insured with a third-party liability insurance policy. So, you cannot avoid buying this coverage. However, when you buy a comprehensive car insurance policy, make sure that the insurance company has not attached any add-on covers to the base plan without your consent.
Add-on covers should be bought to avail coverage against specific events, as per your requirements. So, you should opt for a rider only if you see a significant benefit from the purchase.
Car Insurance For Vintage Cars:
Choosing a motor insurance policy for an antique car is different from the process of buying one for an ordinary used car. This is primarily because a vintage car is worth more money. Insurance companies offer lower rates on the insurance premium of cars that are recognised by the Vintage and Classic Cars Club of India. Overall, the premium for the insurance of a vintage car depends on the following factors:
- The age of the vehicle
- The current state of the car
- The anticipated costs that arise from repairs
- The availability of spare parts and cost of the same
- The total distance the car has already covered
Owners of vintage and classic cars usually buy third-party insurance coverage for these vehicles, as it is too expensive to protect them with a comprehensive insurance plan. Insurers like New India Assurance Co. Ltd. and National Insurance Company Ltd. offer insurance plans for antique cars.
How To Get The Best Insurance Policy For Our Car?
Irrespective of whether you have opted to buy a new car or a used one, it is a great idea to compare policies online. This way, you will be able to get hold of the most optimum policy that offers maximum coverage at a fixed cost. Also, remember to get sufficient coverage for your vehicle so that you do not end up in a financial crisis in the future.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017