Calculating Premium for Old vs New Car: Understanding the Difference

Calculating Premium for Old vs New Car: Understanding the Difference

Car insurance is an essential investment for protecting you and your car from the financial damages due to any unfortunate incident. Many individuals who buy either a new car or a second-hand car wonder if they need to have a policy for their car. Amidst the Covid-19 pandemic, a lot of individuals are opting for private transportation and buying second-hand cars. Firstly, no matter if your car is first-hand or second-hand, it is mandatory by the law to get it insured. Apart from the legal compulsion, getting your car insured is an easy way to take care of car damage bills. 

But is there a difference between getting insurance for a new car and an old car?

Insuring old car vs insuring new car:

Four wheeler insurance available for both new cars and old cars is quite similar. The type of your car does not decide the type of policy you can buy to protect it. If you are looking for a 4 wheeler insurance online, you can choose between the two types of policies available:

  • Third-party car insurance policy:

A third-party insurance policy provides financial coverage for any expenses or damage to a third party that has occurred because of your car. It does not offer cover against the damages/theft of the car as well as Personal Accident Cover for the owner-driver. As a result, the third-party cover is one of the cheapest car insurance plan available in India. According to the Motor Vehicles Act, this insurance policy is a legal compulsion for every car owner on the road. 

  • Comprehensive car insurance policy: 

Comprehensive car insurance is technically an all-inclusive policy. This policy includes own-damage cover, personal accident cover and third-party damages and losses as well. You can further enhance the coverage with multiple add-ons. This policy is one of the preferred policies because of the extensive coverage they provide. 

So, the policies available for both new and old cars are the same. However, some insurance companies only provide a third-party policy for a car that is older than 10 years. Confirm the nature of coverage available for an old car with the insurance provider before proceeding with the purchase.

Calculating insurance premium for new and old car:

In a car insurance policy, you will have to make premium payments to the insurance company for the financial coverage you get through the policy. The premium payments calculation for a new and an old car is the same. The difference in car insurance premiums calculation arises between the two insurance policies available. 

For the third-party insurance policy, the amount is calculated by the Insurance Regulatory Authority of India (IRDAI). They handle the rates for this policy and release it every year depending on the number of claims made. The amount is calculated considering two factors – the policyholder’s earning capacity and the engine’s cubic capacity. 

The premium calculation is done for the comprehensive insurance policy considering factors like liability premium, damage premium, depreciation, and NCB accumulated from the policy. Some of the factors that affect the car insurance premiums are IDV, make and model of car, type of coverage used, anti-theft devices, age of the car, etc.  

Since the car’s age is also a factor while calculating the premium, the premium amount that the policyholder has to pay for a comprehensive cover will be low for an old car than for a new one. 

Car insurance premium calculator:

A car insurance premium calculator is a tool available online that helps get the premium quotes on a policy. When you are finding a policy that suits you, this tool can be quite helpful. One of the biggest advantages of using this calculator is that you can customize the plan’s terms to see if it is suitable. The calculator can also help you compare the different plans available for you. 

To get the exact details for the car insurance premium, you will have to provide details such as:

  1. Registration date and state
  2. Starting date of the policy 
  3. Car make and model
  4. Manufacture year 
  5. Vehicle type
  6. Details about car owner – name, age, marital status, gender, contact details, etc.

For a used car:

  1. Previous car ownership details
  2. Previous year claim history reports 
  3. Current car insurance details

Summing Up

Car insurance is an important document that will provide you with optimum insurance coverage. It doesn’t matter if you have an old car or a new one, an insurance policy will help you take care of damage costs in case of an accident or theft of your car. The premium calculation for both new and old cars is almost the same. If you have decided to buy car policy online, you also can use a car insurance calculator. A car insurance premium calculator is a free-of-cost tool that will help you determine your premium quotes and help you buy an insurance policy. 

David Lockhart