Safeguard Your Second-hand Car With Insurance

You’ve just purchased a second-hand car and are thrilled about the deal you secured. But amidst this excitement, don’t forget to secure car insurance for your new asset. 

Contrary to popular belief, second-hand cars also need good insurance coverage to protect your finances and peace of mind when you are on the road. Moreover, in India, third-party car insurance is legally mandated. Besides, second-hand cars have a history of wear and tear, which means comprehensive car insurance benefits are even more critical. 

In this article, let’s learn about the need for insurance for second-hand cars and the factors you must consider before purchasing an insurance plan. 

Why Is Second-hand Car Insurance Necessary?

Here’s why having insurance for old cars is non-negotiable:

1. Motor Law Compliance

Every vehicle, including your second-hand car, must have at least third-party liability coverage. This legal requirement ensures that any damage or injuries you cause to others are covered if you’re involved in an accident.

2. Second-hand Cars Are More Prone to Damage

With their history of use and natural wear and tear, second-hand cars are more likely to encounter breakdowns and damages. Having insurance coverage protects you from such unexpected financial strain. 

3. Accidental Injury Protection

Accidents can happen, regardless of a car’s age. Including personal injury protection in your car insurance covers medical costs for you and other passengers. 

4. Theft Protection

Second-hand cars are less immune to the risk of being stolen. Comprehensive car insurance protects you from losses associated with theft and other risks. 

Points To Remember Before Buying Insurance For A Second-hand Car

When purchasing insurance for an old car, considering a range of factors can help you secure the best possible coverage. Here are some aspects you must explore: 

1. Depreciated Value of the Car

The value of a car falls between 15-35% within the first year of purchase. When a car reaches the three-year mark, it may only be worth half its original purchase price. This depreciation affects the Insured Declared Value (IDV) for second-hand vehicles, setting it way lower than that of new cars. 

Consequently, this leads to more affordable insurance premiums. However, accurately aligning the IDV with the current market value of your car ensures you’re not losing on your car’s value.

2. Past Car Insurance

Understanding your car’s insurance history is vital. It can provide insights into any claims that could affect your premium rates. A clean insurance record might lead to lower premiums, reducing the cost of your car insurance benefits.

3. Condition of the Car

The physical condition and maintenance history of a second-hand car significantly influences the terms of your insurance. A well-maintained car with regular service records will likely attract more favorable insurance terms. This is because it is less prone to mechanical failures. 

4. Car Insurance Claim History

A car with a history of frequent claims is a higher risk, which might increase insurance premiums. If your car has frequent claims, try to understand why claims were made. Doing so will help you carefully assess different insurance for second-hand car options.

5. New Insurer’s Claim Settlement Ratio

Choosing an insurer with a high claim settlement ratio is critical for reliability. This ratio represents how likely the insurer is to process a claim. The higher the ratio, the more trustworthy the insurance company is. 

6. Premium Cost and Discounts

Lastly, evaluating the premium costs and exploring possible discounts can save you money on insurance for an old car. Many insurers offer discounts for various reasons, such as installing anti-theft devices or for a good driving record. 

Important Add-ons For Second-Hand Cars

When insuring a second-hand car, selecting the right add-ons to your policy can significantly enhance your coverage and provide extra protection. Here are the add-ons you should consider for insurance for second-hand cars: 

• Zero Depreciation Cover: This add-on ensures that the depreciation value is not deducted from the claim amount in the event of a claim. 
• Engine and Gearbox Protection Cover: This addresses older cars’ wear and tear susceptibilities and covers costly repairs not included in standard policies.
• Roadside Assistance Cover: This car insurance benefit offers essential services like towing and emergency fuel delivery.
• Return to Invoice Cover: It compensates the full invoice price in total loss scenarios.
• Key Replacement Cover: This add-on covers the expense of replacing lost or damaged keys. 

Right IDV or Second-Hand Car Based On The Age of the Car 

A car’s Insured Declared Value (IDV) is calculated based on the manufacturer’s listed price minus the depreciation value. 

• For vehicles up to 6 months old: There is no depreciation. So, the IDV is the manufacturer’s listed price. 
• For vehicles between 6 months to a year old: A 5% depreciation is subtracted to calculate the IDV. 
• For vehicles between a year and two years old: A 10% rate of depreciation is applied to calculate the IDV. 

Key Takeaways

Unlike brand-new vehicles, second-hand cars are already depreciated. This makes insurance even more vital, as it helps protect your investment in a used vehicle. Comprehensive coverage with smartly chosen add-ons can help safeguard the repairs that your second-hand car may need. Buying car insurance is as seamless for an older car as a new one. So, do not hesitate to get your car insured. Choose PhonePe for a seamless and efficient insurance purchase process, ensuring your second-hand car is well protected.