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, and what impact will it have on how much you pay?

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, and what impact will it have on how much you pay?

Alex Hasty
Insurance and finance expert
minute read
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Posted 14 JANUARY 2022

How much does vehicle value matter?

When underwriters calculate your car insurance, they’ll take into account how much your vehicle is worth. But when it comes to working out how much you’ll pay, your car’s value isn’t necessarily the most important factor.

For example, if you’re a young driver, the risks associated with this are more likely to affect your premium than the value of your car.

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

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.

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.

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

  • new car values
  • damage and parts cost
  • repair costs and times
  • 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.

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.

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

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

But be aware that 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 documents.

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. If you’re not sure how much your car is worth, plenty of websites will give you a free valuation.

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.

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 for you. Just give us a few details and we’ll find you quotes to see if you could save money..

Frequently asked questions

How do I calculate the 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.

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 I need to tell my insurance provider how much my car is worth?

If you don’t let your insurance provider know how much your car is worth, you probably won’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.

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