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

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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.

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 in the event of a claim
  • It's possible to arrange guaranteed-value policies when you take out cover, but these are typically used for unusual vehicles

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.

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

  • 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.

Valuing your vehicle

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

Always answer honestly, or you risk invalidating your insurance.

The ‘value of your car’ means the cost of replacing it with another one of the same make and model, age, condition, mileage and specification.

If you're not sure how much the car is worth, then an approximate value is fine. The estimated value you suggest isn’t necessarily what you'll get back from the insurer.

Insurers will only ever cover the market value of the vehicle at the time of the accident, unless you have a specialist policy.

Agreed-value polices and Gap insurance

Almost all cars lose value after purchase.

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 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.

Guaranteed asset protection (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.

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