Insuring a car, whether it is second-hand or new, is important. Just like a new car, a second-hand car requires car insurance, which is mandated by the law. Insurers have special policies for second-hand cars that fit well with their needs.
Most car owners buy a second-hand car to save money and in the process may skip buying insurance. Therefore it is important to buy at least a third party car insurance as it is mandated by the law for every new car or a second-hand car in India. Let us take a look at why you should not skirt that purchase.
Insuring second-hand cars should be prioritized over insuring new ones as they always have an element of surprise. After the warranty period expires, the only financial aid you can fall back on in case of an accident is insurance.
These are a few factors why choosing car insurance for your second-hand car is important.
1. Keeping in mind the usage of the car – Unlike new cars, second-hand cars have already gone through wear and tear. The requirement for maintenance is more in second-hand cars. Considering this it is important to have insurance in place to cover any unforeseen expenses the car maintenance may incur. Insurance rightly prepares you against all odds.
2. Helps you prepare for past car accidents(if any) – When you are buying a car and doing your due diligence, the previous owner may skirt a difficult conversation by skipping to mention critical issues pertaining to the car. In such cases, insurance is the way you can get the car repaired and fitted for parts.
3. Must comply with the legal requirements – According to the Motor Vehicles Act, all vehicles must have at least third party insurance while driving on Indian roads. This insurance should be with the person driving the car at all times. Whenever you are asked to produce this, you should be able to do so and if you can’t you can be asked to pay a hefty fine for the same. Third-party insurance is in case there is damage to the other person’s vehicle or property and you have a financial liability towards them.
Also read: LIC gets RBI nod to raise holding in IndusInd Bank to 9.99%
Checklists to consider while buying insurance for a second-hand car
1. Based on the intended usage of the Car: The intended usage of your car will decide whether you should simply go for third party car insurance or comprehensive insurance.
If you are planning to use the car on a regular basis or take it for road trips or long drives outside the city, then comprehensive insurance might be more useful. However, if you plan to rarely drive it within city limits, then third party car insurance is sufficient as it will provide maximum coverage based on the use and your needs of functionalities. It includes coverage for the insured car as well as the driver in case of an accident. Third-party car insurance only includes coverage for repair or property of the other party involved. It may also provide coverage for the driver of the insured car depending on the policy purchased.
2. Consider the Age of the Car: When you are buying the insurance, it is important to remember that the car has probably suffered some damage and there is guaranteed wear and tear of the engine and parts. The number of kilometres and year of registration are reliable indicators of how much the car has been used. The premium will depend on this and you should look at policies that have better coverage like comprehensive insurance.
Also read: RBI allows LIC to double its stake in IndusInd Bank
3. Buy insurance with a reasonable premium: The premium is the deciding factor for most. Who doesn’t like a good deal? The premium for second hand car insurance depends on the details of the car like the date of registration. The premium varies depending on the covers you choose and the corresponding factors get affected too. IDV, deductibles, co-payment percentage, all affect the premiums in a big way.
4. Analyze the accidental history of the car: The claims made through the last year are a great indicator of the kind of maintenance a car requires. If your second-hand car is in great shape and you plan to use it in the city, then you need not invest in covers like breakdown assistance. If you have bought a second-hand car, the no claim bonus goes to the previous owner as it is on the driver. The seller needs to transfer the insurance policy to your name within 2 weeks of the sale to avoid getting a claim rejected.
Also read: Bank deposit insurance cover rises to Rs 5 lakh; refund within 90 days: Piyush Goyal
5. Check for no-claim Bonus: The no-claim bonus is on the driver and not the vehicle. This means if you are buying a vehicle, you will have to pay the difference of the no-claim bonus as it belongs to the previous owner.
6. Analyse the Add-on Benefit: While buying second-hand car insurance, there are a few add-ons that are essential like the tyre protect cover which gives you the benefit to safeguard and cover for tyre damages such as tyre bursts, bulges, or cuts during all situations. The engine and gearbox protection cover covers any damage to the mentioned in case of an accident or any consequential damages.
7. Know About the Insurer: Having enough information about the insurer helps you understand more things about the settlement process, cashless claims, settlement ratio, and so on. These statistics should be evaluated before you choose the insurer. It is advisable to look at the background of the insurer to ensure you are not falling prey to fraud.
Also read: Star Health shares lists with discount; slumps 6% in early trade
The underlying sentiment of buying insurance for your second-hand car is the same as buying insurance for a new car. It protects you from any future loss and helps maintain your car without burning a hole in your pocket.
