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Everything You Need to Know About Car Insurance – Value and Premium

Everything You Need to Know About Car Insurance – Value and Premium 1

Determining the Value of Your Car

When you insure your car, most of the insurance companies will use the computer system to determine the current value of your car. That is why they need to know exactly what car you have like its model number, what year it was manufactured and if you made any modifications to the car.

You can either insure your car for its retail value or market value. The retail value is a better option. Or, you can save on your premium and only insure it for its trade-in value which is a lower value than dealerships normally payout when you sell the car to them or trade it in for a new one.

If you have made extensive modifications to your car or you have an old vintage car that you want to insure, the insurance company will ask you to send in a written valuation of the value.

Determining the Premium You’ll Pay

The use of the car is important when the premium is calculated. For example, if the car is used for deliveries, then it will increase the risk on the car and the premium may be higher. Trips to and from your work count as personal use. When you visit clients during the day, it will be considered either full or partial business use, depending on your type of work and number of visits you make to clients or suppliers every day.

Apart from the use of the car, your premium will also be influenced by, for example:

  • the value of the vehicle;
  • the colour of the vehicle (white cars and cars with bright colours like yellow are normally cheaper);
  • who drives the car (with some companies, insurance on women is cheaper);
  • how old the driver is (young drivers usually pay more because they tend to be more inexperienced and/or irresponsible on the road) or how long the driver has a license;
  • where the car is parked in the day or night (how safe or risky the address is where it is parked, whether it is out in the open or locked up in a garage);
  • previous claims you had (which you have to be very honest about); and
  • the excess you choose (this is the amount that you will be responsible for if you have a claim).

Other Options When Taking Out Insurance

If you choose a higher excess, you will pay a lower premium. Just make sure that if you choose a higher excess to save money, you have emergency funds available to pay the excess if your car was in an accident. Some companies offer you a chance not to have any excess, but of course, at a higher premium.

You have the option to add “Car Hire” as an extra benefit to your policy, which will increase your premium. If your car was in an accident longer than a certain period, you will be able to hire a car for a certain period at no cost to yourself.

Most insurance companies will only provide cover on the car if the person driving the car was specified on the policy as the regular driver. Make sure what your policy says before you let anyone else drive your car. Some companies allow you to add other drivers, like your spouse. Some companies do not list specific names of drivers, but they may charge you an extra excess if the car was driven by anyone else. In any instance, the other driver of your car must either:

  • have a valid driver’s license; or
  • or a learner’s license and be accompanied by someone with a valid driver’s license.

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