How the value of your vehicle affects your insurance price

Vehicle value matters when it comes to the cost of your car insurance. It’s one of the things that can influence how much you pay for your policy.

Kim Jones
Kim Jones
Updated 2 December 2022  | 3 min read

The value of your car can affect the cost of your insurance policy

When an insurer works out what price to charge you for your motor policy, there’s a long list of things they take into account.

One of those is the value of the vehicle you drive.

If you have a particularly expensive car, you’ll likely have to pay more for your motor insurance than someone with a less valuable vehicle.

That’s because it’ll cost the insurance company more to pay out in claims for expensive parts and repairs. And, if the car is written off or stolen, it’ll cost a lot more to replace it.

Key points

  • Insurers take into account the value of your car when calculating the cost of your policy
  • All cars fall into an insurance group from one to 50 - the higher the insurance group, the more you’re likely to pay
  • Top of the range, higher-powered cars that are more expensive to repair and replace will cost more to insure

How to work out vehicle value

All insurers and comparison sites ask you to give an estimated value for your car when you apply for car insurance cover.

That might be the amount you paid for the vehicle when you bought it.

Or you can get a current estimate for the value of your car by using the car valuation tools on sites like AutoTrader and Parkers. You just need to key in your registration number to find out what your car might be worth.

Vehicle value and insurance groups

The Association of British Insurer’s (ABI’s) Group Rating system categorises every make and model of car into a group between 1 and 50.

It provides insurers with valuable information about the relative risk of each car and which ones are likely to cost them the most in insurance claims.

Most providers use the group rating system as part of their pricing process.

Generally speaking, the lower the group your car is in, the less you’ll get charged for motor insurance. Similarly, cars placed in higher insurance groups will be more expensive to insure.

A variety of factors which affect risk are taken into account by the ABI when deciding which particular group a car should fit into, including:

Its price when new

Expensive, top-of-the-range cars will be costly to repair and replace so will tend to be placed in one of the higher groups

Parts prices and repair times

The cost of a list of standard car parts are compared between manufacturers - the lower the cost, the lower the likely group rating. Plus repair times are compared - longer repair times means higher labour costs and a higher group rating

Performance and engine size

High performance cars with high top speeds tend to result in more frequent insurance claims, so go into higher groups

Safety features

Cars fitted with an Autonomous Emergency Braking (AEB) system are at lower-risk of low-speed accidents, helping keep them in a lower insurance group

Security

Features such as high security door locks or alarm/immobilisation systems fitted as standard can help place a car in a lower insurance group

Will switching to a new, more expensive, car affect my policy price?

If you switch to a new car, mid-policy, you can ask your insurance provider to transfer your existing policy to the new car.

You may have to pay a transfer, or administration fee, though this isn’t always the case. And, if the car is more valuable, and in a higher insurance group, your premium may go up - so you’ll need to pay extra to make up the difference.

You don’t have to stay with the same provider, though. You might want to shop around and compare policies to see if you can get a better deal on your new car with a different insurance company. You’ll need to factor in the cost of any cancellation fees if you take this route.

What if my car’s written off, or stolen?

It’s important to be aware that if your car is written off - damaged beyond repair or stolen and never found - a standard insurance policy will only pay out a claim amounting to the current value of the vehicle.

That’s the amount of money your car would typically fetch on the open market were it to be sold at the time of your claim; not the amount you paid for the car or the price of the same make and model new.

So, as cars depreciate over time, the amount you’d get would invariably be less than what you bought the car for.

There are some insurance policies that will pay out more than the market-value of your car. These are ‘agreed-value’ policies and GAP (Guaranteed Asset Protection) insurance.

Agreed-value policies

With an agreed-value policy, you can set the value of your car with your insurer and know that you’ll receive that amount - rather than its average market value - should something happen to your car and it’s written off.

This type of policy is usually taken out by owners of rare, specialist, kit or classic cars, which are worth more than the average market value for a similar age model.

It’s a way of protecting an investment made in restoring a car and keeping it in great condition, for example.

You’ll need to prove your car is worth more than the typical market value to your insurer. That might include providing photos of the inside and outside of the car, and getting an independent vehicle valuation from an expert.

GAP insurance

GAP (Guaranteed Asset Protection) insurance is a type of motor insurance sold as an optional extra.

It’s designed to make up the difference - or bridge the gap - between what an insurance company offers you if your car is written off or stolen (its market value) and what you originally paid for the car (or how much finance you still owe on it.)

It means that, in the event of a claim, you could afford to buy a new car to replace your old one, or pay off what you owe on your finance deal.

Other things that affect your policy price

It’s not just the car you drive that affects your insurance quote. Lots of other things come into play.

The price you’re charged will be heavily influenced by your age, for example. Young, inexperienced drivers will have to pay more for their policies than older drivers with years of safe driving under their belt.

Providers also take into account factors such as your occupation and address, plus things like where your car will be parked and if it's had any modifications when coming up with a price.

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