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

One thing insurance providers consider when calculating the cost of your premium is how much your car is worth. But what exactly do we mean by car value for insurance purposes, and what impact will it have on how much you pay?

Written by

Alex Hasty

Insurance comparison and finance expert

Last Updated

16 FEBRUARY 2023

5 min read

How much does the insurance value of my car matter?

When underwriters calculate the cost of your car insurance, vehicle value is a key factor taken into account. But when it comes to working out your insurance price, your car’s value isn’t necessarily the most important factor. Other factors include:

Your age
The type of car – engine size etc.
The level of cover
Any no-claims discount
Where you live
Your job
Your driving record.

A young driver is deemed more high-risk, because they’re statistically more likely to be in a car accident and make an insurance claim. Because of this, their age is more likely to affect their premium than the value of their car.

The older you are, the more of an impact your car’s value may have on your premium. That’s because underwriters consider older drivers less of a risk, until you reach a much older age.

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

Yes, your car’s value will determine which insurance group it’s in. The groups are numbered 1 to 50, with group-1 vehicles generally being the cheapest to insure. Think of these groups as an insurance vehicle value guide.

Here are the factors underwriters consider when placing cars into insurance groups:

new car values
damage and parts cost
cost of repairs
car performance
safety features
security features.

So, although your car’s value is a factor, it might not be the most important one. The technology incorporated into modern cars means that the cost of repairing them has shot up. Since repairs account for more than half of all car insurance payouts, your car’s repair costs will undoubtedly have a bearing on which insurance group it’s placed in.

Do I have to enter a car valuation when getting a quote?

Yes, you’ll be asked to enter a car valuation for insurance quotes. In most cases, the estimated value you declare on your policy documents will be the price you paid for the car. However, you’ll need to consider how long you’ve had the car and the potential depreciation in its value during that time.

Don’t be tempted to underestimate your car’s value for a cheaper premium. If your car is then written off, you won’t receive its true value. Worse, your insurance provider may find out you were dishonest and invalidate or cancel your policy.

How do I find the total value of my car?

One way to work out how much your car is worth is to visit websites like eBay and Autotrader, and see how much similar models are selling for. There are also various car-valuation sites that will give you a valuation when you enter your car’s registration number.

How do insurance companies value your car?

If your car is written off and you make a claim, your insurance provider will pay out the current market value of your car, not the price you declared on your insurance policy.

That’s because your insurance provider will take into account depreciation. The market valuation they make is the value of the car were you to sell it today.

Where can I find cheap car insurance?

Whether you own a top-of-the-range sports car or a cheap runaround, we can help you find the right car insurance policy for you. Just give us a few details and we’ll find you quotes to see if you could save money.

Frequently asked questions

What is the market value of my car for insurance purposes?

The market value of your car is the value of your vehicle, if it were to be sold on that day and hadn’t been damaged or stolen. They use this to calculate the car insurance value.

Insurance providers use the market value of your car to determine the payout of a potential claim. This could be different to the price you paid for the car, or the value you listed when you took out the policy.

What can I do if I think my insurance provider has underestimated the value of my car?

If your insurance provider proposes a payout that you consider too low, it’s worth gathering as much evidence as you can to back up your case. If you can find similar cars priced differently online or in car showrooms, you’ll be in a strong position to approach your insurance provider and ask for more.

If you can’t resolve the issue, you can always take your case to the Financial Ombudsman.

Why do insurance companies ask for the value of your car?

You need to know the value of your vehicle for insurance purposes, otherwise you wouldn't receive the right level of cover. If you have a luxury car with a cutting-edge infotainment system, you’ll want the peace of mind that comes with knowing it’s properly insured.

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

Just because your car was cheap to buy, don’t assume it will be cheap to repair or insure. There are other risks with cheaper cars that underwriters will take into account, such as difficulty obtaining parts and the risk of vehicle failure.

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

For very expensive cars, your insurance provider might insist that you invest in extra security features. You may also end up with a higher car insurance excess. This can vary between insurance providers, so if you think yours is excessive, it’s worth shopping around to find cheaper excess.