Introduction: Why Two Cars with the Same Value Can Have Different Insurance Costs
Many vehicle owners in Pakistan assume that car insurance premiums depend only on the current market value of the vehicle.
But here’s something surprising.
Two cars may have nearly the same resale price in the used car market — yet their insurance premiums can be very different.
For example:
- A 5-year-old locally assembled sedan
- A 10-year-old imported vehicle
Even if both are valued at around PKR 1,500,000, the insurance premium for each may not be the same.
Why?
Because insurance companies do not assess risk based only on price — they also consider the age of the vehicle.
As a car gets older, its:
- Mechanical reliability
- Repair availability
- Spare parts cost
- Accident risk
- Depreciation rate
all change — and this directly impacts how insurers calculate premiums.
Understanding how vehicle age affects your insurance premium can help you choose the right policy, manage renewal costs, and make informed financial decisions about maintaining coverage.
How Comprehensive Car Insurance Works
Comprehensive car insurance in Pakistan provides protection against both third-party liability and damage to your own vehicle.
Coverage usually includes:
- Road accidents
- Theft
- Fire
- Natural disasters such as floods
- Vandalism
- Falling objects
- Total loss situations
When insurers issue or renew a policy, they evaluate multiple risk factors — including the vehicle’s age — to determine the likelihood of future claims.
Older vehicles may be:
- More prone to mechanical failure
- Costly to repair due to parts availability
- Less structurally safe in collisions
As a result, vehicle age plays an important role in determining your insurance premium.
Who Should Buy It?
Comprehensive car insurance is particularly relevant for:
- Owners of vehicles less than 10 years old
- Bank-financed vehicles
- Daily commuters
- Imported vehicle owners
- Ride-hailing drivers
- Owners living in urban areas with higher accident risk
Even if your car is older, maintaining insurance coverage may still be financially beneficial depending on usage and repair costs.
Benefits
Understanding the relationship between vehicle age and insurance premium offers several benefits:
- Helps estimate future insurance costs
- Supports informed policy selection
- Allows planning for renewal premiums
- Improves budgeting for vehicle ownership
- Encourages timely policy renewal
Knowing how age affects risk assessment enables policyholders to evaluate whether comprehensive coverage remains cost-effective for their vehicle.
Limitations
Older vehicles may present certain limitations when applying for insurance:
- Higher premium due to increased risk
- Reduced eligibility for comprehensive coverage
- Requirement for vehicle inspection
- Lower insured declared value (IDV)
- Limited availability of spare parts
Some insurers may restrict coverage for vehicles beyond a specific age limit, depending on internal underwriting policies.
Estimated Cost in Pakistan
Insurance premiums often increase as the vehicle ages, depending on its condition and claim history.
| Vehicle Age | Estimated Annual Premium |
|---|---|
| 1–3 Years | PKR 30,000 – 50,000 |
| 4–6 Years | PKR 40,000 – 60,000 |
| 7–10 Years | PKR 50,000 – 75,000 |
| Above 10 Years | PKR 60,000 – 90,000 |
Older imported vehicles may incur higher premiums due to parts availability and repair complexity.
Factors That Affect Premium
Vehicle age is one of several factors used to calculate insurance premiums.
Other important factors include:
- Market value of the vehicle
- Engine capacity
- Model year
- Driving history
- Claim history
- Location of use
- Installed security features
- Frequency of use
As the vehicle gets older, depreciation reduces its market value — but increased mechanical risk may offset potential premium reductions.
Real Example Scenario
Consider the case of Salman, who owns a 2014 Toyota Corolla.
When the car was new, his annual comprehensive insurance premium was approximately PKR 45,000.
After nine years of use, the vehicle’s insured declared value decreased — but due to aging components and higher repair risk, his insurer reassessed the premium.
At renewal:
- Updated IDV reduced overall coverage value
- Insurer required vehicle inspection
- Premium increased to PKR 52,000
Despite depreciation, increased claim risk resulted in a higher premium.
Tips Before Buying
When insuring an older vehicle:
- Compare policy options from multiple insurers
- Maintain regular servicing records
- Install anti-theft devices
- Avoid filing minor claims
- Confirm eligibility for comprehensive coverage
- Consider third-party coverage if applicable
- Renew policy before expiry
These steps can help manage insurance costs as the vehicle ages.
FAQs
Does insurance premium decrease as a car gets older?
Not always. While depreciation lowers the vehicle’s value, increased repair risk may result in higher premiums.
Can older cars still get comprehensive insurance?
Yes, but coverage may be limited depending on insurer policies.
Is vehicle inspection required for older cars?
Inspection may be required during renewal for vehicles beyond a certain age.
Does vehicle age affect claim approval?
Vehicle age may influence repair assessment but does not directly affect claim eligibility if the policy is valid.
Conclusion
Vehicle age is a key factor that influences car insurance premiums in Pakistan.
While depreciation reduces the market value of older vehicles, increased mechanical risk and repair complexity may lead insurers to adjust premiums accordingly.
By understanding how vehicle age affects insurance cost, policyholders can make informed decisions about renewing coverage and managing long-term ownership expenses.
Author Bio
Ali Hassan is a financial content researcher who focuses on insurance awareness and personal finance topics for vehicle owners in Pakistan. His work aims to simplify policy terms and promote informed decision-making.
Sources / References
- Securities and Exchange Commission of Pakistan (SECP)
- State Bank of Pakistan Insurance Guidelines
- Jubilee General Insurance Motor Policy
- EFU General Insurance Motor Insurance Terms
- Adamjee Insurance Underwriting Guidelines
