New Car vs. Used Car: How to Purchase Insurance Policy?

Whether you own a new car or an old car, you will have to insure it and renew the policy periodically before driving it on Indian roads. It is mandatory to insure your four-wheeler in India if you want to drive it legally. This mandate is stated under The Motor Vehicles Act, 1988. Failing to follow this rule can land you in a legal muddle. Besides, it is in your favor to insure your vehicle.

New Car vs. Used Car: How to Purchase Insurance Policy? - Acko

How to Purchase New Car Insurance vs Old Car Insurance

Third-party Policy or Comprehensive Policy?

A Third-party Liability policy is a basic policy that is compulsory. It doesn’t offer own damage cover (insurance against theft, fire, calamities). However, a Comprehensive policy includes the mandatory cover as well as offers own damage cover. New cars are susceptible to theft, so a Comprehensive plan is more suitable. But it costs more. You have to think whether to spend more money for extra coverage or spend less money and purchase just the basic cover?

If you raise no claims during the policy period, car insurance premium for insuring an old car will be less due to the accumulated No Claim Bonus (a discount for not raising a claim). Also, premium for older car is less than a new car due to its low Insured Declared Value (IDV).

If you have a new car, you should go for a Comprehensive new car insurance plan to get extensive insurance coverage. If you have two cars, you can opt for a Third-party Liability cover for the older car if it is not used that extensively and choose a Comprehensive new car insurance plan for the recently-purchased car.

Choosing Right Add-ons

Note that you cannot purchase Add-ons with a Third-party policy. You need to buy a Comprehensive Plan in order to buy Add-ons. Consider them as additional plans that can be added to a Comprehensive base plan.

Add-ons are dependent on the age and usage of the car. For example, it is suggested to opt for a Zero Depreciation Add-on for a new car as it negates the depreciation factor while settling claims. Such a cover might not be available for old cars.

Similarly, it doesn’t make sense to pay an extra premium for a Passenger Cover Add-on if you travel in your car without passengers. Old cars tend to break down often, so a Roadside Assistance Add-on seems beneficial.

Understand the usage of the car

Before sitting in front of your laptop or tapping your smartphone to compare car insurance online, understand what is the usage of the car. Ask yourself the following 10 questions:

  1. Is the car for daily use?
  2. Are you going to use the car for long rides (within city) frequently?
  3. Do your go on inter-state road trips regularly?
  4. Do you have another car?
  5. Who all are going to drive the car?
  6. Is the car for personal travel or other family members are also going to be seated in it?
  7. Do you have a history of being involved in a car accident?
  8. Is your locality susceptible to flooding?
  9. Is your locality prone to car theft?
  10. Does your locality have a history of rioting?

Make a note of the answers to these questions and any other related questions that might pop-up in your head. Match the answers to the questions with the coverage offered by the plans to select the appropriate one.

Buy Car Insurance Online

You can buy car insurance online for a new car as well as an old car. It only takes a few minutes to buy or renew a car insurance policy online. In some cases, the insurance company might want to inspect your car if a considerable time has passed after the expiry of the policy.

It is suggested to compare car insurance before buying or renewing a car insurance policy. Keep in mind to compare car insurance based on the cover, premium, extra features and the overall reputation of the insurer. Understand the terms and conditions thoroughly before buying a policy.

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