Many motorists suffer financial loss because their cars are not adequately insured. The first step to keep your car protected from accidents or theft is choosing the correct car insurance policy to suit your individual needs. The second step is making sure it is covered for the correct value. The value you insure for can influence your pay-outs and your monthly premiums.
Choosing the right insurance policy
There are a plethora of car insurance products to choose from, which means you can be selective. But while this is an advantage, deciding on the right product can be confusing. A good way to start is to assess your needs carefully. This helps to avoid paying for cover you don’t really need and paying for cover most important to you.
It’s important to shop around, compare car insurance, and obtain at least three quotes from reputable insurance companies. But remember, every car owner is different – the golden rule is to find the right solution with the right features and benefits that suit your individual needs.
There are a variety of factors that influence insurance premiums, such as the age of the vehicle, where it is parked, and its value.
Insurance policy vehicle values
There are three different values when taking out a car insurance policy: market, retail, and trade. It is essential to understand the differences of each before you decide on which of these values to insure for as it can impact your claim in the event of your car being stolen or written off.
Market value
The market value of a car is affected by several factors such as condition, mileage, and vehicle history. This is the price that you could likely sell the car for and is the average of the its retail and trade values. Research current prices for similar models for sale will help you determine what that value.
Retail value
While the market value is determined by what a car could be sold for privately, the retail value is the average price a car dealer would sell it for. On other words, when you buy a car from a dealer, you would pay the retail value. This is usually higher than the market value. If your car is covered for its retail value, it will be easier to replace (with the same make and model) in case it is stolen or written off.
Trade value
The trade value is the amount a dealer would offer you for a vehicle trade-in and is usually the lowest value out of the three. Generally, the lower the value you insure for, the lower your insurance premium.
Choosing the right value to cover for
You’ll need to go through a needs assessment to find which value is best for you, but as a general guideline:
- If you have a new car, determining the amount to insure for is usually based on the retail (purchase) value.
- If your car is older than two years, insuring for the market value is usually the better option.
Car owners should, at all costs, avoid taking out car insurance below the actual value of their vehicle in an effort to save on insurance premiums. This is important when claiming – you may find the insurance pay-out does not cover the cost to replace or repair your car, leaving you having to fork out of your own pocket.
If you’re looking for trusted, reliable car insurance, get a quote online.
Please note: This document does not replace the terms and conditions of the customer’s insurance policy. Please consult the terms and conditions of the relevant insurer. The customer is obliged at all times to provide true and accurate information to the broker and the insurer and needs to update this information on a regular basis.
