New Car vs. Old Car Insurance: Key Differences Explained

Car Insurance Premium for New Vehicles

Purchasing a new car can incur considerable costs, and their insurance premiums reflect their value and associated risks. The premium for a new car includes several components, such as the car's price, depreciation, and additional coverage options.

 

What Influences Premiums for New Cars?

• Insured Declared Value (IDV): IDV is the maximum claim amount you can receive in case of total loss or theft. For new cars, the IDV is based on the ex-showroom price minus minimal depreciation. A higher IDV increases premiums as the insurer’s risk is higher.
   
• Comprehensive coverage: Comprehensive plans for new cars cover third-party liabilities, own damages, theft, and natural calamities. These policies ensure complete protection but cost more than basic Third-Party Liability Insurance.
   
• Add-ons: New car owners frequently opt for add-ons like:
  • Zero Depreciation Cover: Covers the full claim amount without factoring in depreciation.
  • Engine Protection Cover: Shields the heart of your vehicle from unexpected damage.
  • Return-to-Invoice Cover: In the event of theft or total loss, the car's invoice value is reimbursed.

These add-ons provide enhanced security but significantly increase premiums.

• Safety features: Cars equipped with modern safety features such as ARAI-certified anti-theft systems could have lower premiums since they minimise the risk of major claims.
   
• Location: Insurers classify locations into two zones:
  • Zone A (Metro cities): Due to various factors related to urban conditions, Zone A has higher rates.
  • Zone B (Non-metro areas): Based on the tabulated risk assessment in this zone, there is a marginal impact on premiums in Zone B.

With these factors, the new Car Insurance price balances comprehensive protection with affordability.

 

Car Insurance Premium for Used Vehicles

Value and usefulness are the main factors in used automobile insurance. As depreciation decreases the vehicle's value, premiums are often cheaper for used cars. The age and the condition of the car, however, are crucial factors when selecting a suitable insurance policy and premium.

 

Key Factors Affecting Premiums for Used Cars

• Lower IDV: Older vehicles have a lower IDV because of their depreciated market value. While this lowers the cost of insurance, it also restricts the amount of compensation you may collect during claims.
   
• Focus on Third-Party Liability Insurance: In many cases, third-party insurance is sufficient for used cars. It is mandated by Indian law and provides cost-effective liability coverage.
   
• Limited add-ons: Add-ons like zero depreciation are typically not available for older cars. However, add-ons such as roadside assistance remain applicable for cars that are still in use.
   
• Age and usage: Insurers consider how often the car is driven and its overall wear and tear. High mileage or heavy usage increases premiums as the likelihood of claims rises.

 

With fewer add-ons and lower IDV, Car Insurance for used cars is typically more affordable.

 

Difference Between New and Old Car Insurance

Here’s a side-by-side comparison of how insurance policies vary for new and old cars:

 

Aspect	New Car Insurance	Old Car Insurance
Premium	Higher, influenced by high IDV	Lower, due to depreciation
Coverage Options	Comprehensive with extensive add-ons	Often limited to third-party or basic plans
Depreciation Impact	Minimal, thanks to zero depreciation	Significant, affects payouts
Claim Process	Faster due to easier evaluations	May involve detailed inspections
Add-Ons Availability	Wide range available	Limited to essential ones

 

Coverage Options: New Car Insurance vs Old Car Insurance

New Car Coverage

For new cars, owners typically prefer:

• Comprehensive Coverage: Protects against damages, theft, and liabilities.
• Zero Depreciation Cover: Essential for full claim payouts.
• Engine and Return-to-Invoice Covers: Add-ons that safeguard expensive repairs and the vehicle's full value.

 

Old Car Coverage

Older vehicles often rely on:

• Third-Party Insurance: A cost-effective option meeting legal requirements.
• Comprehensive Plans (Optional): Suitable for cars with significant remaining value.
• Roadside Assistance: Practical for vehicles prone to breakdowns.
   

The type of coverage depends on the car’s age, condition, and owner’s priorities.

 

Claims Process: New Car Insurance vs Old Car Insurance

The claims process varies significantly between new and old cars due to differences in coverage and vehicle condition.

 

For New Cars

• Claims are processed faster as evaluations are simpler.
• Zero depreciation add-on could ensure higher payouts.
• Replacement parts are readily available, speeding up repairs.

 

For Old Cars

• Claims may involve inspections to assess the car’s condition and depreciation.
• Compensation is limited to the car’s lower IDV.
• Repairs may take longer due to challenges in sourcing parts for discontinued models.

Whether new or old, understanding the claims process ensures smoother settlements.

 

Conclusion

When deciding between an insurance policy for a new car vs an old car, it's essential to consider both your car's needs and your budget. New cars often require comprehensive coverage with a variety of add-ons to ensure full protection, while older cars can be covered with more affordable, essential policies. Regardless of the age of your vehicle, choosing the right coverage can help you safeguard your investment and enjoy peace of mind on the road.
 

If you’re looking for reliable and affordable Car Insurance that meets your needs, Shriram General Insurance offers a variety of plans that are tailored to both new and used vehicles. 
 

With affordable premiums, you can customise your coverage with valuable add-ons such as roadside assistance. Our streamlined claims process guarantees less paperwork while facilitating speedy reimbursements. You can also receive a No Claim Bonus for driving safely and have access to our dedicated support team anytime you need it.
 

You can feel secure and confident on the road knowing you have a reliable insurance partner when you choose Shriram Car Insurance.

 

FAQs

1. Is insurance mandatory for used cars?

Every vehicle in India, even used cars, must have third-party liability coverage at the very least. This policy protects other people in case your car is involved in an accident.

 

2. What’s the best insurance option for a new car?

For a new car, comprehensive insurance with add-ons like Zero Depreciation and Return To Invoice is the best option.

 

3. How does location impact premiums?

Due to higher accident and theft risks, cars in metropolitan regions (Zone A) have higher insurance premiums than those in non-metropolitan areas (Zone B).

 

4. Can I switch insurers for an old car?

Yes, you can switch insurers when renewing your policy for better coverage or lower premiums.

 

5. Why is IDV lower for used cars?

Depreciation, which gradually lowers the vehicle's market value, is the main reason why used cars have lower Insured Declared Values (IDV). The drop in value is caused by a number of factors, including mileage, wear and tear, and general condition. The lower IDV results in lower costs for insurance premiums.