Heres what happens to your car insurance premium when your four-wheeler gets old


22 Aug 2023

Managing Car Insurance as Your Vehicle Ages.

Car insurance premiums are influenced by a variety of factors and the age of your vehicle is a significant one. As your four-wheeler ages, you may notice changes not only in its performance but also in the cost of maintaining and insuring it. So, it is important to understand what happens to your old car insurance premium and how you can manage these changes effectively.

What happens to your car insurance premium as your four-wheeler gets old?

Some key points to consider about insurance for old car premiums are as follows:

1. Depreciation and insured declared value (IDV)

The insured declared value (IDV) represents the current market value of your vehicle and serves as the basis for calculating the premium. As your car ages, its value depreciates over time due to wear and tear. As car's IDV decreases with age, your insurance premium tends to decrease as well. However, keep in mind that while a lower IDV might lead to reduced premiums, it also means a lower claim amount in case of damage or total loss.

2. Reduced comprehensive coverage premiums

The premium for comprehensive coverage is influenced by your car's age and IDV. Comprehensive car insurance covers damages to your vehicle as well as third-party liability. Older cars generally have lower IDVs, resulting in lower premiums for comprehensive coverage. This can be an advantage if you want to continue protecting your car against theft, natural disasters, and other non-collision incidents.

3. Third-party liability premiums

Third-party liability insurance is mandatory by law and covers damage or injury caused to a third party by your vehicle. The age of the car might not have a significant impact on the third-party liability premium, but it's important to maintain this coverage regardless of your vehicle's age. This aspect of your premium is influenced by factors like the cubic capacity of the engine and the seating capacity of the vehicle.

4. Maintenance and wear costs

While insurance premiums may decrease due to a lower IDV, your out-of-pocket expenses for maintenance could increase. As your car gets older, it might require more frequent maintenance and repairs. Regular maintenance can help you avoid breakdowns and ensure your car remains in good condition, reducing the risk of accidents and related claims.

5. Voluntary deductibles

As your car gets older and its value decreases, it might make more sense to choose a higher voluntary deductible. Opting for a voluntary deductible means you agree to pay a certain amount out of pocket in case of a claim before the insurance coverage kicks in. This choice can lead to a reduction in your premium. However, assess your financial situation and determine whether you can comfortably afford the deductible if you need to make a claim.

6. No claim bonus (NCB)

No claim bonus (NCB) is a reward offered by insurers to policyholders who do not make any claims during the policy term. As your car ages and you continue to maintain a good driving record, your NCB can lead to substantial premium discounts. NCB can significantly reduce your premium over time, encouraging safe driving and responsible vehicle ownership.

How to manage such changes effectively?

  • Periodically review your car insurance policy to ensure it aligns with your car's current condition and usage.

  • Consider whether certain add-ons, such as engine protection or zero depreciation, are still relevant for an older car.

  • Continue to drive safely and avoiding accidents will help you maintain a good driving record and accumulate NCB over time.

  • Proper maintenance of your older vehicle can prevent accidents caused by mechanical failures and keep your car in good condition, which can influence your premium indirectly.

  • Ensure you're getting the best coverage at the most competitive price.

In conclusion

As your four-wheeler gets older, its impact on your car insurance premium becomes more nuanced. While certain aspects of your premium might decrease, others, like maintenance costs, might increase. By understanding these changes and adjusting your coverage accordingly, you can make informed decisions that ensure your car remains adequately protected. Regular policy reviews, responsible driving and appropriate coverage adjustments are key to effectively managing your car insurance premiums as your vehicle ages. To know more visit kotak general insurance.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.