CAR INSURANCE

So you’ve insured your car (nice work!) but are you covered for the right amount? Always check your policy to make sure your wheels are insured for the right replacement value. If they’re not, and you submit a claim after your car is written off in an accident or stolen, you may not be paid out the amount you hoped for. Talk about adding insult to injury.

You’re probably thinking, ‘Okay, BetterCompare, but what exactly does “right replacement value” even mean?’ Well, there are actually three different values you can choose from when insuring your car: retail, trade and market value. Here’s how to decide which one is best for you.

Retail value

What: Retail value is the highest value you can choose. It’s basically what you’d pay for your particular car’s make and model if you bought it again, new – same car, just without the road-trip memories from last summer.

Who it’s for: If your car is new, new-ish or on the fancy side, then insuring it for retail value makes sense. If it’s irreparably damaged in an accident (or stolen and you don’t have a vehicle tracking service to help you get it back), then you’ll want your insurance company to be able to cough up for an identical replacement. That way, you don’t have to downgrade from your Golf GTI to a CitiGolf just because somebody else hopped a red light and totaled your Blue Lightning.

Trade value

What: Trade value is the lowest value you can choose when insuring your car. It’s equivalent to the amount you’d be offered by a dealer if you were trading in your car when buying a new one.

Who it’s for: You might choose this option if your car is relatively old and you’re more concerned with having a lower monthly premium than with being able to afford the same car if yours goes *poof*. The price offered to you by a dealer when you’re trading in your car is lower than its retail or market value because the dealer needs to make a profit when they sell it to a third party for market value.

Market value

What: Market value is somewhere between retail and trade value and is based on your car specifically (after all, you’re an individual, darling). It takes into account things like your car’s mileage, condition, service history and previous accidents. The final figure is what you’re likely to get if you sold your wheels privately.

Who it’s for: Most people. Your premiums won’t be the highest, but if you find yourself down one chariot, you’ll be able to buy a new one without having to put in too much extra cashola.

Which one should you choose?

That’s mostly up to you (although different insurers may have different rules and upper limits related to your specific car). Just remember that the more you insure your car for, the higher your monthly premium will be (turns out, you can put a price on peace of mind). Your car’s value will also decrease over time, so be sure to check in with your insurer at least once a year to make sure you’re not overpaying for insurance.

Depending on your employment status, you’ll need to provide the following proof of income. Think it’s possible you’re paying too much every month? You can quickly assess your car’s value with our handy calculator, then compare your insurance options in minutes using our independent online tool.