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What would be the Car Insurance premium for a New car & a Used Car?

The premium for a new car would be greater than that of the used car. This is due to the depreciation being taken into account. The depreciation is the result of wear and tear of the vehicle parts due to the usage of the car. There are lot of things which decide the premium of the car and are discussed in the earlier article . It mentions the different factors that are used in the premium calculation.

Overall the premium of the car depends on the below factors and changes with the age of the car. For new car the premium would be higher compared to that of a used car.

1. Own Damage Cover:

The Own damage cover is optional as per the Motor vehicles act in India but is highly beneficial if opted. It reimburses the cost of replacement or repair incurred on your car due to an accident or natural catastrophes. The cost of replacement or repair doesn’t exceed the Insured Declared Value (IDV). The maximum liability of the insurance company in case of repair or replacement would not exceed the IDV of the car.

  • The IDV is higher for a new car and thus the premium is higher for the new car. Higher the IDV, higher the premium. For example, the premium of a brand new Maruti Ciaz with IDV Rs.10 Lacs would be around Rs.20k.
  • Insured Declared value decreases each year due to the depreciation. Thus the IDV for a used car would be less than that of a new car resulting in a lower premium. For the above example, the premium for a used Maruti Ciaz with Rs.5 Lacs IDV would be around Rs. 10k .

2. Add-ons:

A rider or an add-on is an insurance policy provision that adds or amends the benefits of the base insurance policy. Riders provide with extra and wide coverage to the base insurance with an additional premium. This additional cost is different for each rider or add-on in the car insurance policy and is to be decided by the customer which one to opt for.

  • The premium of add-ons for a new car would be slightly on the LOWER side compared to that of a used car. In the above example of Ciaz the premium for Zero Dip add-on would be around 3% of the total premium.
  • In case of used cars the premium for the add-ons would be on the HIGHER side compared to that of the new car. This is due the reason that the depreciation factor is accounted while arriving at the premium. The add-on premium for a used car would be around 4-10% of the total premium.

3. Third party cover:

As per the Motor Vehicles act in India, a valid third party cover is mandatory to drive a vehicle in a public place. Third party liability covers the damage or death of the third party or third party property. Third party liability doesn’t cover the damage or replacement of your car parts. The premium for third party liability cover is decided by the IRDA and doesn’t depend on the age of the car. The premium depends on the cubic capacity of the car.

  • The third party premium is same for both the new car as well as the used car. The third party premium depends on the cubic capacity and not on the age of the car.

The car insurance premium for a new car would be slightly less than that of a used car if only the comprehensive cover is opted. In case of add-ons being opted, then there would not be much difference in the premium. This is because the decrease in comprehensive premium is balanced by the increase in add-on premium for a used car.

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