Ask most people the value of their car and they’ll probably respond with the price that they paid for it. The two figures however are usually quite different. After a three year period a new car is likely to be worth anywhere between 40% and 60% of its original value, depending on make and model.
Insuring a car at a higher value than its market value, i.e. what someone is prepared to pay for it, will do nothing but waste money.
Insurance companies will only ever compensate you for what you have lost. Hence if you over-value a car and pay a higher premium in consequence you still will not receive any more than the value of your car in compensation. Unfortunately it doesn’t work both ways and if you under-insure your car you will only be covered up to the value you have specified.
If your car is written off or stolen, car insurers will usually pay you the ‘market’ value for the car this is essential the amount of money you need to enable you to purchase another car of the same specification and similar mileage to your previous car”.
But how is “Market Value” determined?
There are quite a few different ways of doing this and several databases that can be used, including some that insurers use themselves and there are also trade publications
It’s important to remember that in the event of a claim the amount they offer you won’t take into account, for example, whether your car was in particularly good condition.
You can dispute the amount you are awarded but generally this tends to be non-controversial as car prices would be well known in the industry.”
Before insuring your car ensure you have determined the correct market value.
11th August, 2014