Is Car Insurance Premium Lower for Older Cars?

Yes. In many cases, car insurance becomes cheaper as the car gets older. But it is not always that simple. A vehicle’s age is only one of the factors that insurers consider when calculating premium prices. Read on to understand what affects the car insurance premium for older models and why two cars of the same age can have very different premiums.Read more

How Does a Car's Age Affect Its Insurance Premium?

A car loses its value as it ages, which reduces the insurer's financial risk. As a result, the own-damage component of car insurance for an older car becomes lower. However, the age of the car is only one part of the calculation. There are other factors that car insurance companies take into consideration, such as:

• The car's make and model
• Claim history
• Vehicle registration location
• Any add-ons chosen

Why Does the Car Insurance Premium Decrease as a Car Gets Older?

Have a look at the major reasons why car insurance premiums go down for older cars:

1. Lower IDV

   The Insured Declared Value (IDV) is the current market value of your car. Since cars lose value every year due to depreciation, the IDV also reduces over time. A lower IDV results in a lower premium price for own-damage car insurance.

2. Lower Financial Risk for Insurers

   The insurer's maximum payout for total loss or theft is linked to the car's IDV. As the IDV of an older car is lower, the insurer's risk also reduces, resulting in a lower premium price.

3. Limited Add-on Availability

   If your car is older than 10 years, add-ons like zero depreciation cover are no longer available. This reduces your overall car insurance premium.

When Can an Older Car Have a Higher Car Insurance Premium?

Older cars can have higher car insurance premiums if:

• There is a poor claim history
• Spare parts are expensive or difficult to find
• The car belongs to a high-risk model
• The vehicle is registered in an area with higher accident or theft rates
• There are multiple add-ons included in the policy

Does Third-Party Insurance Premium Also Reduce for Older Cars?

The premium prices for third-party insurance are decided by IRDAI based on the engine or battery capacity (in case of an EV), not on the age of the car. Usually, the own-damage premium decreases as the car gets older; the third-party portion may remain the same unless the rates are revised.

Tips to Reduce Car Insurance Premium for an Older Car

Here are some useful tips you can follow to reduce your car insurance premium for an older car:

• Renew your policy before it expires
• Maintain No-Claim Bonus (NCB)
• Keep your car in good condition
• Choose only the necessary add-ons
• Compare multiple plans before renewal
• Opt for a voluntary deductible if suitable

Conclusion

While car insurance for an older car usually comes with a lower premium, selecting the cheapest policy is not always right. Before renewing your policy, see plans from different insurers, compare prices, review the coverage & add-ons, and then choose a policy that matches your car usage to avoid overpaying for benefits you may not need.