Everything You Should Know About Car Insurance and Valuation

Car Insurance


According to the Motor Vehicles Act, 1988, every car owner in India should have the minimum coverage of a third-party car insurance policy. Many car owners think third-party coverage is inadequate and often opt for comprehensive car insurance. While the premium for a third-party policy is fixed by IRDAI, the cost of comprehensive car insurance varies greatly depending on multiple factors. The value of your car is one such important factor. The higher the valuation of your car, the more will be the premium. You can visit the official website of IRDAI for further details.

Why does higher valuation mean increased premiums? 

When an insured car suffers damage due to events covered in the policy, the insurer bears the cost accordingly. A car valued at an average rate would incur an average risk for the insurers. Hence, the premiums for such a car would not be too high or too low. However, if a highly valued car were to suffer damage, leading to claims on the insurance policy, the insurer would have to shell out exorbitant amounts to get the car repaired. The result of bearing the risk of such large amounts leads to increased car insurance prices for highly valued cars.

How does a car valuation occur? 

To do an accurate car valuation, the insurer takes the following factors into consideration:

  • The make and model of the car 

The make and model influence the car’s valuation and car insurance prices highly. The valuation of a car model from a premium manufacturer that is known for making luxurious and durable cars will be different from that of a car model from a budget manufacturer. *

  • The age of the car 

A new car will be valued at a higher unit than an old car. The newer the car, the less chance it has of requiring repairs. Plus, the depreciation value of a car increases as it gets older due to gradual usage, wear, and tear. A car with a higher depreciation value leads to a lower overall car valuation. Additionally, a newer car with a recent year of manufacturing would be equipped with better amenities; in the case of severe damage, it would be easier to find alternatives. An older car, on the other hand, would have difficulty in this scenario. Hence, the valuation and, thus, the car insurance costs are influenced by the age of the car. *

  • The engine capacity of the car 

A car with a higher engine capacity will be valued at a higher level than a car with a lower engine capacity, even if both the cars belong to the same manufacturer and may have the same year of manufacturing. This, in turn, will affect the price that you will pay for the car insurance policy for the car. *

  • The overall condition of the car

If you have maintained your car well and have ensured good service and care, then it is bound to have a higher resale value in the market. Even if you have a car from a high-end brand, but have not been able to maintain it well, the valuation is likely to go down. Since valuation occurs even during the sale or purchase of an old car, aside from when you are buying a car insurance policy, it is important to take care of this aspect. *

  •  Standard T&C Apply

These are some factors about car insurance that you must remember, whether it is a comprehensive policy or a third party car insurance. Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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