Driving Through Time: Exploring the Connection Between Vehicle Age and Motor Insurance Rates
Age and motor insurance rates: What you should know
When it comes to vehicle insurance rates, there are a lot of factors that go into the making. The location of your vehicle, the driving history of the car owner, the type of car, its make and model, and the accessories installed may all impact the insurance premium. Among these is also the age of the vehicle. Yes, depending on how old your car is, the insurance premium, even with Zurich Kotak Car Insurance, may vary. Read on to understand the relationship between the age of the vehicle and the motor insurance rates.
A car's age affects motor insurance rates, as older vehicles might incur lower premiums due to their decreased value. However, newer cars may attract higher rates due to higher repair or replacement costs. Additionally, a driver's age significantly impacts insurance rates, especially for younger or older individuals perceived as higher risks.
How does a car's age affect car insurance rates?
The Insured Declared Value (IDV) and the insurance premium of the vehicle both are significantly influenced by the age of the vehicle. The IDV is calculated based on the current market value of the vehicle which also includes the depreciation value of the car. Let's dive deeper to understand it in detail.
The car's age and the IDV
Insured Declared Value directly impacts the car insurance premium. The higher the IDV, the higher will be the insurance premium and vice-versa.
Since the market value of the vehicle decreases over time, IDV also decreases. Thus, in turn, the premium rates also go down. After 5 years of a car, the IDV is mutually agreed upon, between the insured and the insurer.
Car's age and the depreciation value
A car is subject to general wear and tear over time and thus, it is a depreciating asset. At the time of calculating IDV, the depreciating value of the vehicle plays a major role. In simple terms, the older your car gets, the lower the premium you have to pay. See the table below to know the depreciating rates decided by IRDAI:
Age of the car | Depreciation value |
6 months and below | 5% |
6 months-1 year | 15% |
1-2 years | 20% |
2-3 years | 30% |
3-4 years | 40% |
4-5 years | 50% |
5 years and above | Mutually decided and agreed between the insured and insurer |
IDV and the depreciation value of a car are two factors in deciding the vehicle insurance rates. Over time, the depreciation value increases which lowers the market value of the car and thus decreases the premium as well.
Is zero depreciation cover helpful?
A higher depreciation value of your car also means you are entitled to get a lower sum insured under car insurance. In order to reduce your out-of-pocket expenses after a claim, you can purchase zero depreciation add-on cover with the car insurance policy online. With this add-on, the depreciation value of your car is deducted at the time of settling the claim amount, reducing your share of the claim.
Conclusion
To sum up, with age, vehicle insurance rates go down because the market value of the vehicle also decreases. Get zero dep add-on to get higher insurance coverage.
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