Expert’s View: Are Old Cars Cheaper to Insure?

Are you looking forward to buying a second-hand car? Or planning to insure your decade-old car so that you can take it on the road again and be confused whether you would need to pay more premium as the vehicle ages with time?

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Above-mentioned prices are for a 7-year-old Maruti WAGON R AVANCE LXI (998 CC) registered in Gurgaon and 15 days before expiry of previous policy

This article will help answer all these questions, helping you understand all the factors that impact an old car insurance premium.

What Factors Affect a Car’s Insurance Premium?

Before we address the elephant in the room, it is important to understand that a car’s age is not the sole deciding factor to estimate the insurance amount. There are various other factors including:

  • Gender and Age: There are chances that male drivers between 18 and 25 years are likely to be involved in an accident. Younger drivers typically carry more insurance rates.
  • Place of Living: If you live in a village or a town there is a high chance to get a higher premium
  • Manufacturer and Model: Each model has a certain claim with the car insurance companies
  • Availability of parts: If the parts are not readily available, in case of an accident, the cost of replacement becomes higher, shooting up the prices.
  • Theft prone areas: In such areas, there is a high chance of theft of parts or car, hence the premium gets higher
  • The security system/Anti-theft Devices in cars: Since the chances of the car getting stolen are less the insurer gives you benefits on car insurance premiumif you have this installed in your car.
  • Chances of breakdown: If the condition of your car is good, the price of the premium goes down, as there are fewer chances of breaking down or availing of insurance immediately.
  • Policy type: A third-party insurance only extends to liabilities by a third party, hence will be cheaper than a comprehensive car insurance
  • Add-Ons: Comprehensive covers can be enhanced with add-on premiums to get enhanced coverage benefits. These add-ons are not available in the policy but can be added by paying an extra amount, thereby increasing the overall premium amount.
  • Driving history: Driving safely, following all the traffic rules, and obeying the speed limit does not only save you from potential accidents but also increases your driving history's credibility. Unsafe driving shows distracted driving, increasing the insurance risk, calling for a higher premium amount.
  • Claim history: Multiple claims suggest that either the vehicle is prone to damage/break down or the owner has not been driving safely on the road, again impacting the premium amount.

Before we move on to the next point of discussion, please note that it is very important to also see other factors that affect a car insurance amount, to better understand the reason behind varied insurance prices for old or new cars.

Insurance Amount for Older Cars – The Age factor  

For many people, a car is not merely a mode of transport, it is a part of their family. For some, it is their first car and for some, it is a special gift. We all have our reasons. This sense of emotional attachment brings in the intent to hold on to it even after its lifetime is nearing its end. Have you ever seen someone referring to their car as ‘her or ‘she’ or ‘baby’? A lot of times, right? Well, it certainly sounds weird to some, but for many – cars are a part of their life. Hence, a lot of people still tend to hold onto their first car or even inherited family cars.

However, this is not something that is considered good when it comes to the auto insurance domain. Though they lead to cheaper insurances, cars which are likely to be considered as an asset, heavily depreciate over time, increasing the insurance risk.

Cheaper or More Expensive?

Car insurance is usually calculated on IDVs or the Insured Declared Value. As the age of your vehicle increases, its market value decreases, hence leading to cheaper insurances. On the other hand, a new car has greater value leading to expensive insurance.

Moreover, new vehicles with features like backup cameras, automatic brakes, and other safety assists make them more likely to protect you from accidents, whereas an old car would be unable to offer you this luxury. Apart from this, in case your car is manufactured abroad, the huge cost of shipment of parts massively drives the insurance prices.

As your car gets older you also get some added benefits other than the cheaper insurance prices like claim-free driving and sizable No Claim Bonus, which in turn give you a lower price for insurance every year.

Besides this, with old cars and claim-free driving, a lot of no claim bonus gets accrued in one’s account. This leads to decreased premium amounts every consecutive year when renewing your old car’s insurance.

Hence, all of these factors make insurance for old cars a relatively cheap financial affair than that of a new car. This makes it an extremely lucrative affair for those who are buying a used car as they get a depreciable asset at a cheaper rate than the original market value as well as get comprehensive coverage at low premium amounts.

Expert’s Verdict

Though the insurance amount for older cars is dependent on a lot of factors, it is still cheaper. Keep in mind that although new or old - if uninsured, you are leaving your vehicle heavily prone to damage and in the case of an unfortunate accident, the price you would end up paying would be much higher than the price you would have paid to buy insurance earlier.

Another factor that cannot be ignored is safe driving. It ultimately boils down to how safe you are driving than which car you have, a new or an old one. Safe and responsible driving habits will keep the probability of accidents occurring at bay and will also help you save a lot of money in the future.

Written By: PolicyBazaar - Updated: 17 September 2021
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