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Used Car Valuation and Its Impact on Car Insurance

  • Author :
  • TATA AIG Team
  • Published on :
  • 06/07/2022

India’s automobile market is growing exponentially. With people frequently changing their cars, the used car market has also become extensive. Many individuals prefer buying a second-hand car due to its affordability. However, while buying a used car, its actual value may not be known to the buyer. Also, with the growth of digital marketplaces, used car valuation becomes difficult. Read ahead about used car valuation and its impact on the insurance of your four-wheeler.

What is Used Car Valuation?

The value of a new car starts depreciating after it leaves the showroom. Some cars lose their value up to 40-50% in the initial years. This makes buying a used car more affordable than buying a new one. But when you buy a used car, ensure you know its actual value. The method to determine the actual market value of a used car at a given time is known as used car valuation.

The factors determining the value are depreciation, accidents or other incidents that might have impacted the car. The value reached is called the Insured Declared Value (IDV) of the car.

Why Used Car Valuation?

An informed decision is a wise decision. The IDV of a second-hand car helps you know the real value of the car while buying one. You would not like to pay more sum for a lesser value. So, it is essential you carefully determine the value of the used car.

Moreover, second-hand car valuation helps buy appropriate car insurance because the IDV of the car affects the premium.

How is the IDV of the Used Car Calculated?

The car depreciation calculator India helps to know the IDV of used cars. The method of determining the used car valuation involves the car’s age and the car depreciation rate. The process can be understood through the following table:

Age of the car Car depreciation rate in India (in percentage)
Up to 6 months 5
Between 6 months and 1 year 15
Between 1 and 2 years 20
Between 2 and 3 years 30
Between 3 and 4 years 40
Between 4 and 5 years 50

If the car is more than five years old, the insurance provider will determine the IDV after getting it inspected by a surveyor and discussing it with the car owner.

Calculator for Used Car Valuation

You can use the car valuation tool available on the internet to know the actual value of a used car. The following details need to be filled in for car valuation in India:

  • Make/Model of the car
  • Year of manufacture
  • Registration number
  • Registration place

Apart from the above details, you can also share details like the condition of the vehicle, age of the car, accident history and mileage to get an accurate second-hand car valuation.

The Impact of Used Car Valuation on Car Insurance Premium

Car insurance companies calculate the premium based on the value of the car. No matter whether you are buying or selling an old car, the vehicle valuation has a direct bearing on motor insurance.

  • If you are a seller, under-pricing the car to avoid high premiums will lead to a low claim amount in case of total damage or theft. Also, you will have to sell your car at a loss in future due to under-pricing. On the other hand, inflating the price of your car will lead to higher premiums and difficulty finding buyers. So, ensure you declare the real value of the car while buying insurance for your four-wheeler or selling your car.

  • If you are a buyer, make sure you check the IDV of the car on the insurance certificate. It is the easiest way to determine second-hand car valuation. If the seller has not mentioned the correct value, you will fail to get the actual sum from the insurance company. Also, check whether the car has third-party or comprehensive insurance as they have low and high premiums respectively.

Factors Impacting Car Insurance Premium of Used Car

Multiple factors determine how much premium you’ll pay for used car insurance. They are as follows:

  • The geographical location of the car: If the car is parked or driven at a location prone to natural disasters or thefts, the used car insurance premium will be higher.

  • Type of use of the motor vehicle: If the car is used for commercial purposes, the premium will be higher as a commercial vehicle is more prone to wear and tear. On the other hand, if the car is used for personal purposes, the premium will be lower.

  • Fuel type: A car running on CNG is more prone to risks than a diesel, electric or petrol car. So, the premium for a CNG car is higher.

  • Type of coverage: In the case of third-party coverage, the premium is low. While the premium is higher for comprehensive coverage.

  • Riders: Adding riders to the comprehensive insurance plan of the used car will automatically increase the premium.

  • Safety features: A second-hand car with safety and security features reduces the risk of injury or theft, lowering premiums.


Car insurance is essential whether it is a new or a second-hand car. Now that you know the importance of used vehicle valuation and its impact on car insurance premiums, ensure you quote the correct value of the car. Also, if you wish to buy a used car, check the history of accidents or other mishaps to know the accurate value of the car. Third-party car insurance is mandatory as per the Motor Vehicles Act, 1988. Apart from that, you should consider buying comprehensive car insurance to protect it in the best possible ways.

Tata AIG offers a range of motor insurance policies that you can choose from. With several add-on covers, you can personalise your car insurance plan that suits you best. With a few clicks, you can buy motor insurance online or renew your existing policy from Tata AIG’s website.

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