Car insurance values

Car insurance is essential. But insuring it for the right value is important, too.

If you get into an accident and your car is written off as a result, or your vehicle is nicked by thieves, you want to be sure that you'll be able to replace your ride with one that's at least similar without being out of pocket.

Does the value of your car affect insurance?

When you’ve got third-party-only car insurance, the value of your car doesn’t factor into it because your car isn’t being insured. However, with comprehensive and third-party, fire and theft car insurance, the value of your vehicle will affect your monthly debit order.

On comprehensive plans, the fact is that the more valuable your car is, the more it will likely cost to replace if it goes bye-bye. Essentially, the insurance company is accepting higher potential liability, and they’ll charge you extra for this.

Retail value is the average price you would pay for your vehicle if you bought it from a car dealer. Typically, if your car is stolen or written off, you’d be paid out a settlement amount based on the retail value.

This is usually the highest value that you can insure your car for and is often reserved for brand-new sets of wheels. It includes the profit a dealer would make from the sale of your car—because you’d have to pay that if you were replacing your ride.

Market value, on the other hand, is what you’d get for your car if you went to sell it in the open market (somewhere like Gumtree or Facebook Marketplace, for example). The market value of a car will always be lower than the retail value and is determined by a variety of different factors. (More on those later!)

What Is Car Insurance Book Value?

Also known as the actual cash value or trade-in value of your vehicle, book value is the estimated worth of your car in the current market. In practice, trade-in value is how much a car dealer would pay for your vehicle if you went to sell it.

This value is always lower than the market value, which means that you’ll pay lower premiums, but you’ll also be covered for less.

From the car's make and model to mileage and market trends, many factors go into how much your car is worth to an insurer. Here's everything you need to know before deciding what value to insure your vehicle for.

One of the biggest factors in determining what your car is worth is what make and model it is. When it was produced also plays a role in affecting the value.

Newer cars generally have a higher value because they haven’t been on the road and subject to as much wear and tear as their older counterparts. The make and model matter because some brands and types of cars hold their value better than others.

Moreover, as your car ages, it depreciates. In other words, it loses value over time. Depreciation is a standard factor in valuing assets. Imagine you own a three-year-old Toyota Corolla and your friend has a three-year-old BMW 1 series, both in the same condition. Even though both cars are the same age, the BMW will likely have a higher insurance value because of its higher sales price.

Let’s look at a real-life scenario to better understand how different valuations can impact your insurance coverage.

Hannah and her siblings Henry, Hazel, and Hugo all need cars. They know that they can get a better deal on their vehicles if they buy in bulk, and they find a dealership that’s willing to give them a discount if they all buy cars at the same time.

Being the cautious older sister, Hannah decides to insure her new set of wheels for its retail value. Henry opts to insure his car for the market value, while Hazel goes for the trade-in value.

Over the course of a couple of months, each of the siblings’ cars is either stolen or involved in major accidents that involve them being written off. Talk about a run of bad luck!

Valuing your car correctly is super important for ensuring that you’re able to replace your vehicle in the event that it’s written off or stolen.

Retail and market value usually give you more comprehensive coverage, while trade-in value might leave you financially strained if you have to replace your car. Agreed value offers a bespoke solution for your specific needs.

Now that you know all about the different car insurable values, let Hippo.co.za help you find the best car insurance quote for your needs.