How the value of your vehicle affects your insurance price
The value of your car can affect how much you pay for car insurance.
Insurers also have their own way of calculating the value of your car if it's ever written-off.
Here's everything you need to know about how the value of your car affects your insurance.
The value of your car can affect the cost of your insurance policy
Insurers look at the car value, among other things, to work out how much to charge you for a policy.
Usually, you'll pay more for insurance if your car is more valuable because the parts are more expensive to repair or replace.
Valuable cars are also more likely to attract the attention of criminals so there's also a higher risk of them being stolen or vandalised.
The value of your car can also affect the type of car insurance policy you can buy.
Some insurers won't cover cars above a certain value unless you take out a fully comprehensive policy.
This means that you won't be able to take out third-party, fire and theft or third-party only policies.
Car value can also affect the insurance group a vehicle goes in
The main thing that insurance companies use to figure out how much the car you're insuring should affect your price is its insurance group.
The value of your car is one of the thinngs that can affect the insurance group your car ends up in.
Every car in the UK is put into an insurance group of between 1 and 50.
Insurers use these groups to work out how much your car insurance will cost.
The higher the car insurance group, the more expensive your insurance policy will be.
So a car in group 1 will cost a lot less to insure than a car in group 50.
Insurance groups are decided by an independent company called Thatcham who test cars whenever they're released.
Most insurers use Thatcham's groups but others make their own tweaks.
They'll look at other things to figure out your car's insurance group too, like the
- cost of repairs
- availability of parts
- safety features (or lack of safety features)
Getting performance car modifications like changing your engine can also affect a car's insurance group and make it more expensive to insure.
You can look up your car's insurance group with our insurance group checker.
Switching to a more valuable car can affect your price
You can usually transfer your insurance to a new car mid-way through your policy. You just have to tell your insurer. (But there's usually a fee to do it.)
But sometimes they won't cover your car if it's too "high risk". And if they do, your policy can get a lot more expensive.
Your car's value can make a big difference to how much more expensive it is to insure.
So if you do want to switch your insurance to a new car, make sure you either check with your insurer or get a few different quotes before you do the transfer.
The value of your car can be affected by things like:
- Engine size
- Age of the car
- Mileage (if you're buying second-hand)
- Engine type (electric, hybrid, diesel or petrol)
- Colour
Keep an eye out for these things before you buy your new car. It's worth getting a few quotes first.
Insurance companies will value your car when it's written off
Sometimes insurance companies will write-off a car if they don't think the cost of repairing it is worth paying.
Instead, insurers offer you the "market value" of your car at the time it's damaged.
They don't look at the value of your car at the time you bought it.
Some insurers use independent companies to value cars and will use their estimates when deciding your write-off payout.
Most insurers rely on a company called Glass's, who come up with three different prices:
- Trade-in price
- Private seller price
- Dealership price
You can challenge your insurer and try to negotiate a better price if you're not happy with their valuation.
You'll need lots of evidence to prove that their estimate isn't right though.
Try to get as many quotes from different sources and make a note of any changes you made that could increase the car's value, such as a new set of tyres.
If your case doesn't get anywhere you can also contact the Financial Ombudsman Service (FOS) who will review your claim and make a final decision about the valuation.
Some policies can help you claim back the original value of your car
Some policies pay out more than just the market value of your car if it ever gets written-off.
These policies are called "agree-value policies'.
Agreed-value policies
With agreed-value policies, you and your insurer set a fixed price that will be paid out if your car is ever written-off.
You don't see these policies very often. You might only be offered if you have a classic car, or a car with unique and valuable car modifications.
Agreed-value policies tend to be a lot more expensive than standard policies.
So, it's important to weigh up whether reclaiming the original value of your car is worth the extra money you pay for a policy.
GAP insurance
Guaranteed Asset Protection (GAP) insurance pays the difference between the original value of your car and what your insurer pays out.
For example, if you bought a car for £5,000 and your insurer pays a market value of £3,500, your GAP insurance will pay £1,500 to make up the difference.
GAP insurance can be useful for repaying your car finance company if the insurance payout isn't enough to cover your debt.
It can also be useful for replacing your car with a brand new model.
Car value isn't the only thing that can affect your policy price
The value of your car can make a big difference to your price. But it's not the only thing that has an effect.
Insurers also look at lots of other things when working out your car policy price including:
They use this information to predict how risky you are to insure based on details they have about drivers with a similar profile to you.
So, some of these factors could influence the price of your car insurance more than the value of your car alone.
Take your age for example.
Insurance is often more expensive for younger drivers because people under 25 tend to get into more car accidents and make more claims.
Similarly, drivers living in cities usually pay more for insurance because they tend to be more crowded with heavy traffic and higher crime rates, which makes drivers more likely to claim.
