(Newswire.net — July 19, 2020) — The importance of car insurance is well known. Whether you are buying a new policy or renewing an existing policy, it is important to ensure that you have adequate coverage for your car. When you buy car insurance, you must know that there are some differences while buying a new car, as compared to buying an old car.
1) Changes in IDV
A critical aspect of car insurance is the IDV or Insured Declared Value of the car. This IDV is calculated keeping in mind the present market value for the car. When you buy a new car, its IDV is higher as the car is new. This ensures you have a higher amount of coverage for the car.
Every year, the market price of the car reduces. This will bring down the IDV of the car. When you buy insurance for an old car, its IDV is lesser, ensuring lesser amount of coverage. This has a bearing on the premium too, which is directly related to the IDV. The premium for an old car is much lesser than that of a new car.
2) Third-party vs. Comprehensive
Third-party insurance is the minimum requirement under law. A third party insurance policy provides coverage against injuries to a third party or property damage for property belonging to a third party. Such a policy does not cover damages to your own car.
Comprehensive car insurance provides complete coverage, including damages to your own car in an accident, natural calamities, or manmade hazards. It also covers losses due to theft of the car.
When you buy an old car, you may be tempted to buy third party insurance, as the premium is lesser. You must note that as the car becomes older, there is wear and tear and the risks of accidents are more. The risk of theft is more, since old cars may not have the latest security devices. This makes it more important to get a comprehensive policy.
3) Condition of the car
A new car usually comes right from the factory. Since its condition is new, there is a lesser risk. The older a car is, the higher is the risk of breakdown and damages. This can result in a higher premium if the insurer feels the car is at a risk.
4) Transferring the policy
If you buy a new car, you need a new car insurance policy for it. When you buy an old car, you have the option to get the insurance policy transferred from the old owner. The benefit is that you can continue the policy and get the benefit of a lower premium. However, the previous owner would lose any no-claim bonus accrued and hence may not transfer the same. This can affect the overall premium and needs to be kept in mind.
Being aware of the differences listed above will ensure that you buy the right car insurance policy that gives you proper coverage. This will ensure your car is protected against all risks.