Does car value affect insurance?
Yes, your car’s value is one of several factors that insurance providers use to calculate the cost of your car insurance premium.
As a rule of thumb, the higher the value of your car, the more expensive your car insurance quote will be. That’s because insurance providers will factor in the potential extra cost to them if you do need to make a claim.
A high-value car may have expensive parts and could cost more to repair. It will also cost more to replace if it’s written off in an accident or stolen. Also, your car’s higher price tag could make it more attractive to thieves in the first place.
Key points to consider
Your car’s market value plays a role in how your insurance premium is calculated – but it’s far from the only factor involved.
Insurance providers look at your car’s insurance group when calculating their quotes – a car’s value is one factor that affects what group it’s placed into.
High-value cars are typically more expensive to repair and replace – that means you could get a cheaper insurance quote by choosing to drive a lower-value car.
How much does the insurance value of my car matter?
Although your car’s value is a key factor when it comes to calculating the cost of your car insurance, it isn’t necessarily the most important factor. Insurance providers will also look at:
Your age
The type of car – engine size etc.
The level of cover
Where you live
Your job
Your driving record.
Depending on your circumstances, some of these factors could influence the cost of your premium more than your car’s value. For instance, your age. 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.
This means that car insurance is likely to be high for younger, inexperienced drivers, regardless of how valuable the car they drive is. But they could still get a relatively cheaper quote by choosing to drive a car in a lower insurance group.
Does vehicle value influence which insurance group my car is in?
Yes, your car’s value plays a part in determining which insurance group it’s in. The groups are numbered 1 to 50, with group 1 vehicles generally being the cheapest to insure.
Here are the factors industry experts consider when placing cars into insurance groups:
The price of the car when new
Cost of replacement parts
Cost of repairs
Car power and performance
Safety features
Security features.
So, although your car’s value is a factor, it might not be the most important one. According to the Association of British Insurers (ABI), the biggest single factor affecting rising car insurance premiums in 2023 was the cost of repairs, which rose 31% from the previous year.
The ABI attributed this rise to increased energy and labour costs, plus the specialist expertise needed to fix more sophisticated, modern vehicles – particularly electric cars. Since repairs account for more than half of all car insurance pay-outs, 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. This is to make sure that your car is covered for the correct value.
Sometimes you’ll be asked to enter the price you originally paid for the car. Otherwise, you’ll need to enter your car’s current market value. This accounts for the potential depreciation in your car’s value during the time you’ve owned it.
How do I find the value of my car for insurance purposes?
One way to work out the value of your car for insurance is to visit websites like eBay and Autotrader to 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.
To save you the bother, when you compare car insurance quotes with us, simply tell us your registration and we’ll give you an estimate of your car’s current market value.
How do insurance companies value your car?
If your car is written off and you make a claim, your insurance provider will normally 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. They’ll pay out the value of the car were you to sell it today – at the same age, mileage and condition it was in just before it was written off or stolen.
However, there are a couple of types of car insurance policy that will pay out more than the current value of your car. Here’s how they work:
GAP insurance
If your car is stolen or written off, GAP insurance could cover the difference between the current market value of your car and what you paid for it. It’s separate cover, normally taken out in addition to a comprehensive car insurance policy, that could top up your pay-out in the event of a total loss so you can buy a brand new car.
GAP insurance is entirely optional, but it could be something to think about if you’ve recently bought a car on finance, and you could end up owing more than the car is worth in the event of a total loss.
Agreed value policy
With agreed value car insurance, you and your provider agree at the start of the policy what you’ll receive as a pay-out in the event of a total loss claim. You’ll normally have to prove your car is worth more than market value though, perhaps through an independent valuation.
Agreed value policies are normally associated with classic car insurance and modified car insurance because they allow drivers to protect the extra investment and care they’ve put into their vehicles.
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.
FAQs
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 written off or stolen. They use this to calculate the car insurance value.
Insurance providers use the market value of your car to determine the pay-out 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 pay-out 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?
Insurance providers need to know the value of your car so they can ensure you have the right level of cover. For example, if you have a luxury car with a cutting-edge infotainment system, you’ll want to know that it’s properly insured.
What else should I consider if I have a lower-value car?
Just because your car was cheap to buy, don’t assume it’ll 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, such as:
Storing your car in a secure garage overnight, ideally with CCTV and automatic floodlights.
Fitting a Thatcham-approved CAT 5 car tracking GPS device that can, for example, recognise authorised drivers and allow the police to immobilise the car if it’s stolen.
Installing a ghost immobiliser that can help protect your car from theft through key-cloning and hacking.
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.
Julie is passionate about delivering a great customer experience and rewarding people for saving on their insurance through our loyalty and rewards programme. She’s spoken to the media, including outlets like Sky News, about car and home insurance, as well as our Meerkat rewards scheme.
Our content is written by a Compare the Market expert, backed by data and enhanced by AI. Find out how we ensure accuracy and quality in our Editorial Guidelines.
What our expert says...
“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.”