How vehicle value affects car insurance

The value of your vehicle impacts the price of your car insurance. Learn how to estimate its market value for a more accurate car insurance quote.

Alice Lloyd
Alice Lloyd
Updated 16 September 2019  | 2 min read

Why does vehicle value matter?

All insurers and comparison sites ask you to estimate the value of your car when applying for car insurance cover.

The estimated value you suggest isn’t necessarily what you’ll get back from the insurer if your car is stolen or written off though.

That’s because almost all cars lose value after you buy them and insurers will only cover the market value of the vehicle at the time of the accident - unless you have an agreed value policy or guaranteed asset protection (Gap) insurance.

An estimated value is used to determine the level of risk. The more expensive your car, the more expensive parts, repairs and replacement might be, which will affect the price of your premium.

Key points

  • Vehicle value plays a part in calculating the cost of premiums, but other factors often play a more significant role
  • Always estimate vehicle value honestly, but an approximate estimation is usually fine
  • Don’t assume that you’ll get back the value you estimated if your car is stolen or written off
  • It’s possible to arrange guaranteed-value policies when you take out cover, but these are typically used for unusual vehicles

How to work out vehicle value

When you compare car insurance with us, we’ll estimate what your car is worth using an industry-standard valuation service. It’s based on the vehicle having an average mileage for its age and no optional extras.

You can also look on third party sites like AutoTrader to find an approximate valuation for your vehicle.

If you're not sure how much the car is worth, or you don’t agree with the valuation, then an approximate value is fine.

Always answer honestly, or you risk invalidating your insurance.

Agreed-value polices and Gap insurance

If you want a like-for-like car, have outstanding finance to pay off, or you’ve spent a lot of money on modifications and upgrades, the insurer’s pay out won’t cover your costs.

Agreed-value policies

Agreed-value policies set the value of rare, specialist, kit, or classic cars in stone.

If you’re ever in an accident, or the car’s a write-off, the agree-valued policy will pay out the amount specified at the start of your policy.

GAP insurance

Gap insurance works a bit differently. It pays the difference between the settlement figure from your insurer and the value of your car when you purchased Gap cover. It’s useful if you have a new car, or outstanding finance.

Vehicle value and your insurance

Insurers calculate the cost of your car insurance based on several factors, like your address, occupation and driving history.

The value of your vehicle also plays a part in it, because it has an impact on your car’s insurance group.

Insurance groups

Insurers use vehicle insurance groups to help calculate premiums. Cars are put in groups on a scale from one to 50 based partly on the cost of parts and estimated repair time. Generally, the more your car is worth the more it’ll cost to insure.

  • High-value cars

For high-value cars, many insurers will require additional vehicle security above the manufacturer’s standard settings. Each insurer will have their own set rules, but some request you fit a tracking device for example.

  • Low-value cars

Owning a lower-value car won’t necessarily mean cheaper insurance. There are other risks associated with cheap cars, like hard to source old parts and the higher risk of a vehicle failure leading to an accident.

Other factors can have bigger impacts

There’s no hard and fast rule about whether the value of the car will push the cost of your car insurance up or down.

For example, a young driver’s premium will be more influenced by the risks associated with their age than by the value of their car.

Whether their first car costs £300 or £3,000, the cost of insurance won’t be affected by the vehicle value because a lack of driving experience poses a greater risk.

Older drivers see more of an influence from vehicle value as there are fewer risks for insurers to consider. They’re also more likely to be insuring a more valuable car.

Your car’s value may limit your choice between a third party, third party fire and theft, or comprehensive insurance policy.

Many insurers will refuse to cover a high-value car unless you take out a comprehensive insurance policy.

A third-party policy isn’t necessarily cheaper than comprehensive insurance, and it may not have the cover you want.

Compare and save on your car insurance

Start a quote