Does the value of your car affect your car insurance?

Does the value of my car affect which insurance group my car is in?

Yes, your car valuation will determine which car insurance group your vehicle is placed in. (These groups are numbered 1-50. Cars in insurance group 1 are often cheaper to insure – and the higher your group number, the more you’re likely to pay.)

Why car value matters

The valuation from your insurer isn’t necessarily the figure you would get back from them if your car was stolen or written off. Cars continually lose value over time due to factors such as age-related depreciation, everyday wear and increased mileage.

However, knowing your car’s market value helps insurers determine the level of risk. A powerful, range-topping sports car will always be more expensive to repair (or replace) than a budget supermini with the most basic trim – and this is reflected in the cost of insurance.

Why do insurance companies ask for the market value of your car?

Car insurers use market value when calculating insurance costs, as this allows them to estimate the potential payout from an insurance claim on your policy.

How do I find out the value of my car?

You can use our free car valuation tool to find out your car’s market value in 30 seconds or less. Simply enter your reg number and mileage to get started.

Alternatively, you can visit various online car marketplace websites and take note of the prices for cars of the same age, model and condition (with a similar mileage).

How do insurance companies value my car?

If your car is written off and you make a claim for it, your insurer may pay out its current market value. This won’t necessarily be the same as its value when you bought it (or the value stated on your policy documents), as a car’s value will almost always depreciate over time.

Your car’s current market value refers to what your vehicle would be worth if it was sold today (and hadn’t been damaged or stolen).

What is an agreed value policy?

An ‘agreed value’ in a car insurance policy refers to the amount that your insurer has agreed to pay out if your vehicle is written off or stolen (and cannot be recovered). If you have an ‘agreed value policy’, your vehicle’s agreed value will be stated on your Certificate of Insurance.

It might be appropriate to choose an agreed value policy if you own a classic car – or a car that is fitted with expensive modifications.

However, agreed value policies are typically more expensive than standard car insurance policies. Therefore, you should carefully consider whether the ability to claim for your car’s original value is worth the extra cost.

My insurance company has underestimated the value of my car – what should I do?

If you feel that your insurer has underestimated your car’s value, you should gather evidence that proves your assumption.

Take note of how similar cars are priced online and at car dealerships. If you can gather evidence that they are priced higher than the insurer’s valuation, you will be in a good position to ask them to reevaluate your vehicle.

If you are unable to resolve the matter with your insurer, you can raise a complaint with the Financial Ombudsman Service.

I have a high value car – what should I do?

A higher value vehicle will usually require specialised insurance with greater coverage than what would be required for a standard vehicle. These policies are invariably more expensive due to factors such as the higher repair costs and increased risk of theft associated with valuable cars.

High-end cars are also vulnerable to more sophisticated crimes. Gangs frequently target premium vehicles, stealing them to order and then shipping them overseas. With a specialised high value policy, you will be covered for this eventuality. (Most standard policies will not cover this.)

What’s more, although a standard insurance policy may cover you for accidents and liability, a higher value policy will provide added protection - and usually covers you on an ‘agreed value’ basis. This means the value that the insurer will pay out is agreed upon at the outset and remains constant throughout the policy.

When choosing an insurance policy for your high value car, you should research the market carefully. Review policies from several different providers (make use of price comparison websites if necessary). Consider both cost and the coverage each policy provides before deciding which one is the best fit for you.

You should also think about which add-ons (e.g. wrong fuel insurance) would provide you with peace of mind and protect your investment.

I have a low value car – what should I do?

Contrary to popular belief, lower value cars aren’t necessarily cheap to insure. When pricing your policy, underwriters will take into account factors such as the risk of mechanical failure and the difficulty of obtaining replacement parts.

As such, you should shop around before settling on a policy for your low value car. Use price comparison websites and think carefully about which type of insurance and cover would best suit your individual needs.

What other factors impact the cost of your insurance?

Car value is a key factor in determining what you pay for your insurance, however it isn’t necessarily the most important. Other variables that can influence your insurance premium include:

• Your age

  A young driver is statistically more likely to be in a car accident and make a claim on their insurance. Therefore, a young driver’s age will usually affect their insurance premium more than the value of their vehicle.

  Overall, younger drivers tend to pay the most for their car insurance. In fact, according to research by a popular online comparison site, over a third of young drivers spend more on their car insurance than what their vehicle is worth!

  Read our guide to insurance for young drivers for tips on finding the best possible quote if you’re under 25.

  After the age of 25, most people’s car insurance premiums will start to fall. Insurance costs will often decline slowly between the ages of 25 and 60.

  According to data from the Department of Transport, the number of collisions per mile travelled in England declines with age until around the age of 70, after which it begins to rise sharply.

  Therefore, many drivers will find that their insurance premiums begin to rise after the age of 70. According to the same Department for Transport report, drivers over 70 are involved in fewer collisions than the youngest cohort, although this is likely because older drivers travel fewer miles per year.

  The data also revealed that drivers aged 86 or older are involved in more collisions than those aged 17-24. However, although car insurance premiums do rise for elderly drivers, they are still less expensive than for the youngest motorists.

• Your job title

  As insurance premiums are based on risk, underwriters will factor in your occupation when working out a quote for you.

  Many insurers deem the following occupations as low risk:

  • Secretary (including legal and medical secretaries).
  • Personal assistant or clerical assistant.
  • Local government worker.
  • Insurance worker.
  • Teacher.
  • Judge.
  • Management professional.

  Insurers tend to offer drivers with these jobs cheaper premiums, as data has shown they are less prone to exceeding speed limits or driving in an unsafe manner (and therefore make fewer car insurance claims than those in higher risk occupations).

  There are certain occupations that insurers tend to categorise as high risk. If your occupation is any of the following, you can expect to pay a higher car insurance premium:

  • Fast food delivery driver.
  • Delivery courier.
  • Construction worker.
  • Barber.
  • Fast food caterer.
  • Waiter.
  • Abattoir worker.
  • Apprentice.
  • Professional athlete.

  Pro tip:

  Adjusting your stated job title on your car insurance application can help you to save on costs. However, it is important to bear in mind that your job title should still accurately reflect what you do for a living. If it does not, this could constitute fraud.

  MoneySavingExpert’s Car Insurance Job Picker tool can help you optimise your job title to save money on your car insurance whilst staying legally compliant.

• Your claims history

  • Regardless of whether you were at fault, it is very likely that your insurance premiums will increase after you have made a claim.
  • The amount by which your insurance costs rise will vary depending on factors such as who was at fault, the severity of the collision and your previous driving record. (An increase of 20-50% following a claim is typical.)
  • When you purchase a new car insurance policy, you are obligated to notify the provider about any previous car insurance claims you have made.
  • You can check your claims history by contacting the relevant insurer(s) and requesting details of your previous claims.
  • Alternatively, you can contact the Claims and Underwriting Exchange (CUE) by visiting the Motor Insurer’s Bureau (MIB) website and submitting a subject access request form.

• Your postcode

  Where you live can also affect your car insurance premiums. The chances are, you do most of your driving close to home. Therefore, your postcode can inform underwriters of some of the risk factors you may face as a driver, such as:

  • Population density and traffic flow - (The more cars and pedestrians that are on the roads around your home, the greater the chance you’ll be involved in a road accident.)
  • The number of ’high risk’ traffic systems (e.g. cycle lanes and roundabouts) in the vicinity of your home.
  • Local crime rates (including vandalism and theft statistics).
  • The number of uninsured drivers living in the area.
  • The number of road accidents recorded around the area (and the number of car insurance claims made).
  • Whether any fraudulent claims have been made near your address.

  Car insurers use the above information to classify UK postcodes according to risk. Each postcode is placed into one of six groups (labelled from A to F, with ‘A’ representing the lowest risk and ‘F’ the highest).

  • Urban and inner-city areas tend to be placed in higher risk groups due to their denser populations and heavier traffic flow.
  • Government statistics also indicate that the number of vehicle offences (including theft) correlates with how urbanised an area is.

  According to data collated by a leading insurance comparison website in April 2023, drivers in Greater London have the highest insurance premiums, paying an average of £1,029 annually. Meanwhile, drivers in the North East of England pay the lowest premiums (an average of just £598 per year).

• Your car type

  The type of vehicle you drive can significantly affect your car insurance premium.  

  Luxury cars are the most expensive to insure. Here’s why:

  • Models from prestigious manufacturers such as Bentley, Aston Martin, Ferrari, Tesla and Lamborghini have some of the highest brand-new price tags on the market.
  • They also feature specialised high-performance components which are expensive to repair and replace.
  • Unfortunately, these highly desirable vehicles are frequently targeted by car thieves.

  The prospect of owning a classic car is attractive to many buyers, as this allows them to enjoy a high-end luxury sports car without paying the brand-new price tag. Many older models have classic car tax exemption – and some classic cars may even rise in value, making for a sound financial investment.

  Insurance for classic cars is often affordably priced, because:

  • Classic car owners tend to take excellent care of their cars.
  • Many drivers will use their classic car as a ‘Sunday drive’ (as opposed to a regular runaround) meaning they drive fewer miles.

  However, underwriters will also factor in a classic car’s condition and desirability among collectors when calculating its insurance premium.

  Hatchbacks also tend to be cheap to insure. However, if you’re looking for the cheapest possible quote, it may be worth considering an older hatchback model.

  Recently, due to the global semiconductor shortage, many manufacturers have focused on building vehicles in bulk - and have reduced the number of trim levels across their ranges.

  This often means that the most basic model in a range now features the most popular tech as standard. Therefore, today’s hatchbacks carry higher brand-new price tags than previous generations - and you might struggle to find a bare bones base model that would give you the cheapest possible insurance premium as you might a few years ago.

  With that said, even new hatchbacks are relatively affordable to insure for most drivers.

  Electric cars tend to be more expensive to insure than equivalent petrol and diesel models. This is due to their higher brand-new price tags – and their specialised components that are often expensive to replace. (electric car batteries alone cost over £5,000 to replace)

  Repairs for electric cars are also costlier and more specialised than for combustion engine cars. These factors have contributed to higher insurance premiums for many EV drivers.

• Your trim level

  Your choice of trim will also affect your insurance premium. The base trim for a particular model will be in a lower insurance group than the top-of-the-range version due to its lower price tag - and will therefore cost less to insure.

• Safety features

  Advanced car safety features can help to reduce the number of collisions. A 2018 study by the Insurance Institute of Highway Safety showed that the crash involvement for vehicles with blind-spot monitoring technology was 14% lower than the same models without it.

  You could save money on your insurance premium if your car is equipped with any of the following safety features:

  • Collision warning/blind-spot monitoring technology.
  • Anti-lock braking system (ABS).
  • Adaptive cruise control.
  • Lane departure warning.
  • Rear view cameras.
  • Immobiliser.
  • Anti-theft device.
  • GPS tracking (which can be used track your car’s location if it is stolen).

  Read our guides on car security and protecting yourself from car theft for tips and advice to keep your vehicle secure.

• Modifications

  Many drivers make modifications to their car to improve its functionality and performance – or to add a personalised touch. However, it is important to be aware that many modifications can increase your car insurance premium, as they increase the value of your vehicle.

  • Performance modifications such as replacing the engine, brakes and exhaust may place your car in a higher insurance group.
  • Certain enhancements to your car’s performance may also increase your car insurance costs, because they increase your risk of being involved in a car accident.
  • Cosmetic modifications such as a bespoke paint job or tinted windows may also increase your premium, as they can make your car a more desirable target for thieves.

  However, certain modifications that improve your vehicle’s safety may reduce the cost of your insurance premium. These include:

  • Engine downsizing (e.g. swapping your engine for a smaller one with the same power) - This can deliver the same performance whilst expending less energy. Just as increasing your engine size can ramp up your premium, reducing it can bring insurance costs down.
  • High performance brakes – The addition of a higher performance braking system can improve your vehicle’s responsiveness – and may reduce insurance costs for a highly-modified car by as much as 10-15%!
  • Suspension upgrades – Most modern car’s suspension systems are more than adequate, so upgrading it is unlikely to lead to significant savings on your insurance - unless the vehicle is already heavily modified (in which case, you can expect to save around 5%).
  • Sway bars – When a car completes a turning manoeuvre (or swerves in the road), the transfer of weight onto one side can hamper the vehicle’s handling. To combat this issue, some drivers add sway bars (also called ‘stabilisers’ or ‘anti-roll’ bars) to their vehicle, which reduces body rolling by connecting the wheels on both sides. This helps to distribute force equally in cornering situations. Sway bars can also save you around 5% on your insurance premium, if you drive a heavily modified car.

  Some car modifications, such as ‘debadging’ are unlikely to affect your insurance premium. Debadging (the practice of removing the manufacturer’s emblems and badges from a vehicle) is considered a minor modification and therefore should not affect what you pay for your insurance.

  However, if you are considering debadging your car, you should also bear in mind that if you damage your vehicle whilst doing so, it is unlikely that you will be covered by your insurer.

• Your annual mileage

  The higher your annual mileage, the higher your premium is likely to be, because as you clock up more miles, your chances of being involved in a collision (and making a claim on your insurance) increase.

  Important: Don’t be tempted to downplay your annual mileage. If your reported mileage is inaccurate, your policy may be cancelled. You are obligated to notify other insurers of any cancelled policies when applying for cover, which could make it more difficult to find insurance (and increase your premiums). Therefore, you should always be honest when estimating your annual mileage.

  If you do exceed your annual mileage (or expect that you will before your policy ends), you should notify your insurer promptly. They might charge you an ‘adjustment fee’ to update your details (usually between £15-30).

  You may notice that your premium goes up after you increase your annual mileage. If you find the increase to be excessive, consider whether cancelling your existing policy and switching to one with a higher mileage allowance would be a more economical option.

• Insurance type

  The type of car insurance you choose can affect how much you pay.

  There are three main types of car insurance in the UK:

  • Third-party.
  • Third-party fire and theft.
  • Fully comprehensive.

  It is a commonly held belief that third-party policies are cheaper than fully comprehensive insurance.

  In the past, third-party and third-party fire and theft insurance policies were often priced lower than fully comprehensive cover. However, this led to many high-risk drivers choosing one of these cheaper options to save money on car insurance.

  After realising that many claims were being made by higher-risk drivers with third-party policies, many insurers stopped offering them at cheaper rates.

  In fact, nowadays, fully comprehensive is often the cheapest option with most insurance providers - despite offering the most cover out of the three main insurance types!

• Named drivers

  If you have a named driver on your policy, this can affect how much you pay:

  • If the named driver is less experienced than you, this could reduce their premium but increase yours.
  • Conversely, if you are less experienced than the named driver, your premium is likely to be less and theirs higher.

  Important: The person who drives the vehicle the most should always be nominated as the main driver. Lying about this as means to get a cheaper car insurance policy is sometimes referred to as ‘fronting’. This practice is illegal and classified as fraud.

• Whether you pay monthly or annually

  Whether you choose to pay for your insurance policy on an annual or monthly basis can affect how much you pay, with annual payments usually being the cheaper option.

  If you don’t have the means to pay the full annual amount upfront, some insurers will allow you to pay on your credit card. If you have a credit card with a favourable 0% interest period, this can allow you to benefit from the lower annual payment cost whilst enjoying the flexibility of paying in monthly instalments.

  Paying monthly can be beneficial for some customers, however. For instance, it could positively impact your credit history. So long as you keep up with your payments, paying in this way could help you to build a good credit rating.

  However, bear in mind that if you fail to keep up with payments, this may hurt your credit score. A missed payment can remain on your credit report for up to six years – and may make it more difficult to secure credit in the future.

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