Respect Senior Care Rider: 9152007550 (Missed call)

Sales: 1800-209-0144| Service: 1800-209-5858 Service Chat: +91 75072 45858


Claim Assistance
Get In Touch
Car Valuation and its Affects on Car Insurance
Sep 8, 2022

How Used Car Valuation Affects Car Insurance?

With the sales numbers in the auto industry picking up after the slack period brought upon by the recent pandemic, the used car market is also becoming competitive. Being informed of the current value of your car helps to price it right at the time of sale. Pricing it right also helps buy suitable car insurance online. It can be observed several times that car owners unnecessarily overprice their cars without any reason. Doing so, not only causes a problem while reselling your car but also creates a barrier for buyers that are looking for affordable pre-owned vehicles. Thus, it is essential to set the valuation of your car right. This article will help to understand how you can determine the valuation of your car and its impact on insurance coverage.

How Can You Determine the Valuation of Your Used Car?

Whenever buying or selling a used car, it is essential to know its exact valuation. Without that, determining the right price for your car may become difficult. Moreover, you might not get the right value. Hence, knowing its valuation is important. Valuation is the method of determining the fair value for your car based on several factors like depreciation, previous accidents, and the age of the vehicle. The older the car, the higher the impact of depreciation, and consequently, the reduction in its value. This value of the car, after considering the above factors, is also known as its Insured Declared Value or IDV is used in comprehensive car insurance plans. The Indian Motor Tariff in its General Regulation numbered 8 (GR.8) lays down standardized rates of depreciation for valuing vehicles based on their age. The table below mentions the depreciation rates:
Age of the Car Percentage of Depreciation for Calculating IDV Effective Insured Declared Value (IDV)
Up to 6 months 5% 95%
More than 6 months to 1 year 15% 85%
More than 1 year to 2 years 20% 80%
More than 2 years to 3 years 30% 70%
More than 3 years to 4 years 40% 60%
More than 4 years to 5 years 50% 50%
*Standard T&C Apply

How Does the Valuation of the Used Car Impact Its Car Insurance Prices?

The Insured Declared Value or IDV is a significant factor that determines the prices of the car insurance policy. Here is how it impacts the seller and the buyer of a used car:
  • From the Point of View of a Seller

For a seller, having a lower valuation of the car would mean financial loss when selling it to another buyer. Additionally, the lower IDV would also mean a lower insurance payout in the event of an unfortunate situation of total loss or constructive total loss. On the other hand, setting a higher valuation would dissuade buyers and have a negative impact on premiums by way of higher car insurance prices. Therefore, setting the right IDV is crucial not only to sell your car but also to make sure the right compensation is paid by the insurance company. *
  • From the Point of View of a Buyer

For a buyer of a used car, the valuation is important to ensure the car is available at the right price. Moreover, the insurance policy must be transferred within 15 days to the buyer when selling the car. Thus, the third-party coverage is transferred by the seller to the buyer. While the own-damage cover and its benefits (like NCB) remain with the seller, the buyer can buy a fresh comprehensive coverage to ensure all-around protection. At these times, a car insurance premium calculator is a nifty tool that can be used to compare and buy a suitable policy. *   *Standard T&C Apply  Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

Was this article helpful? Rate it

Average rating 5 / 5. Vote count: 18

No votes so far! Be the first to rate this post.

Like this article? Share it with your friends!

Share Your Thoughts. Leave a Comment Below!

Leave a Reply

Your email address will not be published. All fields are required