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How does the value of my car affect my car insurance premium?

How does the value of my car affect my car insurance premium?

One of the factors underwriters will consider when calculating your car insurance premium is the value of your car.  

But what is actually meant by car value and how much of an impact does it have on the final price of your premium?

Daniel Hutson
From the Motor team
minute read
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Posted 29 OCTOBER 2019

How much does vehicle value matter?

When car insurance is calculated, underwriters will take into account the value of your vehicle, but it isn’t necessarily the most important factor when it comes to working out the price of a premium.  

For example, the premium for a young driver is likely to be affected more by the statistical risks associated with their age than by the value of their car. According to road safety charity Brake, one in four drivers aged 18-24 crash within the first two years of passing their test. So, their youth and inexperience pose an even higher risk than the car itself.  

Vehicle value may have more of an influence on premium price for older drivers as there are statistically fewer risks for underwriters to consider. Older drivers are also more likely to have the means to insure a more expensive car.

What else should I consider if I have a higher value car?

For very expensive cars, your insurance provider might insist on additional security features over and above the manufacturer’s minimum. You may also face an additional or increased car insurance excess. This can vary between insurance providers so it’s worth shopping around if you think it’s excessive.

Does vehicle value influence which insurance group my car is in?

Yes, vehicle value is one of the deciding factors that influence which insurance group your car will be put in. Insurance groups range from group 1 to 50. A vehicle in insurance group 1 is generally cheaper to insure, while 50 is the most expensive.

In setting insurance groups, the following factors are taken into account:

  • new car values
  • damage and parts cost
  • repair costs and times
  • car performance
  • safety features
  • security features

So, although car value is a factor, it might not be the most important one. According to the Association of British Insurers (ABI), incorporated technology in newer vehicles has pushed repair bills up by 33% in the past four years. The cost of car repairs accounts for over half of all the money paid out in motor insurance claims, so it’s safe to assume that repair costs feature strongly in how the groups are defined.

What else should I consider if I have a cheaper car?

Don’t assume that because your car was cheap to buy or not worth much, that it will be cheap to insure. There are other risks with cheaper cars that underwriters will take into account, such as the difficulty obtaining older parts, general wear and tear, and the higher risk of vehicle failure leading to an accident.

Do I have to enter a valuation?

Yes, you will be asked to estimate the value of your car. In most cases, the value you declare on your insurance policy documents will be the price you initially paid for the vehicle.

Be aware though, that if make a claim and your car has been written off your insurance provider will pay out the current market value of your car, not the initial price you declared on your insurance documents.

That’s because vehicle depreciation is also taken into account. The current market valuation made by your insurance provider is the value of the car if it were to be sold on the open market that day. There are online sites where you can get a free valuation, if you’re not sure of the current value.

You may be tempted to underestimate the value of your car for a cheaper premium. If it’s written off you won’t get back it’s true value. Worse, your insurance provider may find that you dishonestly obtained the insurance, and will invalidate or even cancel your policy.

Where can I find cheap car insurance?

Whether you have a luxury top-of-the-range model, or a cheap runaround, we can help you find the right car insurance for you and your vehicle. Just put in your details along with those of your car and see if you could save money.

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