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User Car Valuation and Its Impact on Premium

India is swiftly becoming one of the largest consumers of automobiles, until a recent slow down in sales of new cars. However, that does not mean that people aren’t buying cars anymore. There is still one market that cannot be ignored when it comes to car sales and that is the used car market. To bring some perspective, in 2018-2019 3.6 million new cars were sold in the country. During the same time, 4 million used cars were sold.

It should not come as a surprise that the used car market is growing and becoming a preference among buyers. One of the primary reasons being, car owners feel they get pre-owned cars at a good value. The value of a car depreciates as soon as it leaves the showroom. In fact, some models are known to lose their value by 40-50% in the first year itself. Thus, someone aspiring to buy a car can do so at much lower price points by opting for a used car.

The cycle of purchasing a car and reselling it has also reduced to a large extent. In the previous decade, the average ownership period for a car lasted between 8 to 10 years as compared to the current average ownership period which is about 3 to 5 years.

Valuation of a Used Car

The valuation of a used car is merely using accurate methods to calculate car insurance premiums. This includes factors such as the depreciation of the car, any incidents or accidents that the car is involved in, etc. After considering all these factors, they arrive at the IDV or Insured Declared Value of the car. Whether cars are directly sold to customers or via brokers or used car merchants, the following depreciation table comes into the picture.

Car’s Age

Depreciation in %

Up to 6 months


Between 6 months and 1 year


Between 1 year and 2 years


Between 2 years and 3 years


Between 3 years and 4 years


Between 4 years and 5 years


Car Insurance for Used Cars

The perils of driving a car remain the same, whether you use a new car or a used car. If you are planning on buying a used car, here are some of the reasons why you should purchase car insurance along with it at the earliest.

    It Pays For Damages

    If an insured were to meet with an accident, the policy will take care of any damages or repairs associated with it. Given the hefty repair bills that cars usually come up, this is one expense you would not want to pay from your pockets.

  • It Gives Your Legal Clearance

    According to the laws, one must have a car insurance policy to be able to legally drive on the public roads. If you are caught driving without insurance, you will end up paying a hefty fine.

  • Liabilities

    The policy also looks after any legal or medical liabilities that can stem from an accident.

    Impact on premium

    The following are some of the major factors that affect or impact the car insurance premium of your used car.

  • Place of Registration

    The premium would vary on the type of city that you register the car in. Tier-I cities would have higher premiums than Tier-II cities. Similarly, places that are prone to natural calamities would fetch a higher premium.

  • No Claim Bonus

    If you owned a car previously, you can carry forward the NCB to get discounts on the current policy.

  • Riders

    You can opt for add-ons to improve the policy coverage, but it comes with a slightly bumped up premium.


Buying a car insurance policy is important for new as well as used cars. If you haven’t already purchased one, you should get it done at the earliest to meet legal requirements and also protect yourself in case of any mishap.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by

Mukesh Kumar | Motor Insurance Expert | 36+ years of experience in insurance industry

A veteran in the insurance industry, Mukesh Kumar has the expertise of handling various functions like Business Development, Underwriting, Claims, Human Resources, Quality Management and Marketing. With rich knowledge of the industry, he loves to share his views on topics of insurance sector and takes special interest in educating people on advantages of having insurance.

Mr. Mukesh Kumar recommends "getting your two wheeler insured from HDFC ERGO, a brand serving more than 1 crore+ customers. With overnight repair services and more than 6,800+ network garages, you can be assured of help in event of any damage to your vehicle".

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