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CAR INSURANCE

Used Car Valuation and Its Impact on Motor Insurance

Janhavi Shinde Janhavi Shinde 07 January 2019
5.0 (2 votes)

Do you know the worth of your car and plan to it soon? Do you even have a slightest clue how this would impact motor insurance? If you want answers to these queries, this article is meant for you.

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Knowing the value or worth of your car is important if you are planning to sell it to a third party. Not only does it help you get a fair price on your vehicle but also lets you choose an adequate insurance cover for the same.

When it comes to car buyers, often, such persons are on the lookout for people who are willing to sell their car as per the market value and depending on the car’s condition instead of overpricing it unnecessarily.

Therefore, it is recommended that you evaluate your car at the right price to garner the attention of buyers for it.

In this article, we focus on what exactly is used car valuation and how does it impact motor insurance.

What is Used Car Valuation?

Used car valuation is nothing but the method of accurately valuing your vehicle keeping in mind factors such as depreciation, previous accidents, etc. The value that is arrived after the consideration of such factors is known as Insured Declared Value (IDV). Here is a chart that is generally used to find out the amount of depreciation that is to be levied on the car.

Age of the carPercentage Depreciation for IDV
Up to 6 months5%
6 months-1 year15%
1 year-2 years20%
2 years up to 3 years30%
3 years up to 4 years40%
4 years up to 5 years50%

While valuing your car, make sure that you keep the chart in mind in order to arrive at the correct value.

Impact of Used Car Valuation on Motor Insurance

The impact of used car valuation on motor insurance can be understood both, from the perspective of the seller as well as the buyer.

Viewpoint of Seller

In case the car is under-priced, there is a chance that you would lose out on making great profits. Another downside of the same is that you receive a lower claim payout as per your insurance plan in case of a total loss event such as the theft of your car.

On the contrary, if you overprice the vehicle, you might not find buyers easily. Also, you might have to pay high premium and may not receive an adequate claim payout in case of a total loss event.

It is, therefore, extremely important that you find a balance between the two poles and price your car at a genuine rate.

Used Car Valuation Calculator

In order to find the correct and accurate price of your used car, you can use several online calculators to easily assess the amount. We at Coverfox.com offer you a simple way to check the price of your used car. Click on the link to know more.

Transferring Insurance Policy

While selling a car, in case of an ongoing insurance policy, the seller has to make such facts known to the insurance company in writing. A nominal fee along with the proportionate amount of No Claim Bonus (NCB) also has to be submitted from the date of transfer until the expiry of the policy.

Viewpoint of the Buyer

From the perspective of the buyer, you need to understand that the motor insurance of your car purchased from the seller can be of two types: comprehensive insurance (optional) or third party insurance (mandatory as per Motor Insurance Act).

While purchasing a motor insurance on a used car, some people usually decrease the IDV simply so that they can just pay a reduced premium amount. While this might be a profitable practice in the short term, it might cause a problem when you have to claim damages. This is because the insurance company wouldn’t pay you as much as your car deserves since you showed a decreased value of the same at the very first instance.

Factors Affecting Motor Insurance Premium of Used Car

Simply speaking, your car insurance premium depends on a range of factors that directly affect how much you are going to pay for the security and safety of your car.

Here is a list of some of the most important and compelling factors that can directly impact the amount of premium you have to shell out every month:

Location

Your location where you keep and drive the car is a very important factor. If the area is prone to natural calamities or is a theft prone area, the premium attached would be a lot higher than otherwise.

No Claim Bonus (NCB)

No Claim Bonus can be understood as the bonus given to the policyholder for not claiming insurance cover for a particular period of time during the policy. Such bonus accumulates over the years of the policy. In case you do make a claim for accident or damages, the premium payable by you in the subsequent year is quite high since no insurance company would want to risk its money for a negligent car owner.

Type of Fuel

It is a usual practice that the type of fuel as well is taken into consideration while deciding the amount of premium. The premium in case of CNG cars is higher as compared to petrol or diesel cars.

Type and Model of the Vehicle

Again, in case your vehicle is a commercial type, the premium to be paid would obviously be higher since the car would go through more wear and tear than a private car. On the contrary, if your car is of a recent make and is used only for personal consumption, the premium does not amount to a big value.

Covers or Riders

If your car insurance policy is laden with extra covers or riders, you surely have to pay a higher motor insurance premium. Such riders or add ons help you secure your car better.

Safety Features

A good amount of safety features in your car can surely save the day. Insurance companies prefer or favour those vehicle owners who take good care of their car by installing safety features in their cards such as anti-theft, car lock, etc. The motor insurance of such cars cost quite less than cars without such enhanced features.

Bottom line

So, this was all about used car valuation and how motor insurance has to be dealt with in the case of a second hand car. Make sure you value your vehicle accurately so as to not suffer undue loss with respect to the sale amount nor the amount of insurance.

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Janhavi Shinde
Written by Janhavi Shinde
Right from being a Flight Attendant to a Banker and now to a Content Writer, she has tasted success in all the fields. The kinda girl who loves pets and knows how to manage difficult people and events.