Does Car Value Affect Your Insurance Premium?

There are several things we worry about when purchasing or selling a used car. But, getting the best deal is what causes us the greatest concern. Figuring out the car’s resale value can sometimes be challenging and daunting.

Furthermore, there are numerous ways in which the value of a used car influences the car insurance in Dubai which you must pay. In this article, we’ll provide you with all the details you need to know about it.

How Insurance Works?

When determining how much to charge you for coverage, insurers take into account the car’s value among other factors. Because more expensive parts are needed to fix or replace a car with a higher value, you will often pay more for insurance.

There is a larger danger of theft or vandalism for valuable cars because they are more likely to draw the notice of criminals. The kind of auto insurance coverage you can get may also depend on the value of your car.

Unless you purchase fully comprehensive coverage, some insurers won’t cover vehicles that are worth more than a specific amount. You won’t be able to purchase third-party, fire and theft, or third-party-only insurance as a result.

What is the Impact of Used-Car Valuation on Car Insurance?

The impact of used-car appraisal on insurance premiums is substantial. As previously noted, the Insured Declared Value (IDV) of a used car determines how much is insured under the insurance policy that is purchased for it. In the context of auto insurance, the sum insured refers to the maximum sum that a policy would pay in the event that the car was totally destroyed.

The higher a vehicle’s IDV, the higher the sum insured, and as a result, the higher the insurance policy premium. In some cases, a lesser IDV might be declared and the vehicle underpriced in order to cut the cost of the annual premium. Although it would lower the vehicle’s selling price, this could help save some money on insurance rates. Lowering IDV would also result in a lower sum insured amount. This implies that in the event of a total loss, such as car theft, a reduced compensation would be made under the insurance policy.

Finding a buyer at that price would be the first challenge if one inflated the IDV of a car in order to acquire a bigger quantity of money as its selling price. And afterward, a larger sum would also need to be paid as the insurance policy’s premium. However, there would be no certainty of a greater claim settlement in the event of a total loss because many terms and conditions could need to be satisfied. To ensure maximum transparency and minimum hassles, always declare the correct IDV of your vehicle.

Factors that Affect the Car Insurance Premium:

• Insured Declared Value (IDV)

The “insured declared value,” or “IDV,” is the amount that represents the car’s current market value. Your insurance company may establish this value after adjusting for depreciation. It is the estimated present value of your car after subtracting its depreciation.

As time goes on and your car’s worth declines as a result of depreciation, the IDV of your car lowers. Yet, the cost of your auto insurance goes up with your vehicle’s IDV.

• Make and Model of Your Car

One of the factors affecting the cost of your auto insurance is the make and model of your vehicle. When compared to faster, more conventional vehicles, the insurance rate for riskier vehicles like sports cars is typically greater.

Premiums are typically greater for vehicles that have more cubic capacity, run on gas, or use compressed natural gas.

• Safety Features

Your overall car insurance rate may be reduced if your vehicle has an effective auto lock or anti-theft device installed. When a theft attempt is made or the automobile is being broken down, car alarms and other anti-theft equipment notify the owner (by sounding an alarm, etc.). Modern vehicles include GPS systems that make it easier to find them.

Together with lowering your auto insurance rates, these safety features serve a very useful purpose.

• Coverage Required

The cost of your car insurance in Dubai may vary depending on the level of protection that your vehicle needs. It is usually more expensive to purchase comprehensive auto insurance, but nevertheless, it is necessary. While third-party insurance is required, the decision to obtain collision insurance is entirely up to you.

Your car insurance rate will go up if you add on extra coverage like zero-depreciation insurance, vehicle towing expenses in the event of a breakdown, increased third-party liability, protection of NCB benefits, and many others. There is no questioning the advantage and peace of mind that these add-ons provide in real-time use, even though they may increase the policy price.

• Frequency of Claims

There is another variable that affects the cost of your auto insurance. The insurance companies in UAE offer a discount on the premium for the following year to those who haven’t filed any claims throughout the annual policy year. This benefit is known as a No Claim Bonus, or NCB.

Wrapping Up:

In general, car valuation is done to determine a car’s value now or in the future. You can choose whether a new or used car is worthwhile to purchase based on this value. Also, age has a vital role in determining a car’s worth and insurance cost. Your car’s IDV rises year as a result of depreciation, and the maximum amount that may be claimed decreases.

Although it could cut your rate, this also provides less security. In this situation, it might be wise to consider the Zero Depreciation Cover to prevent your premium and IDV from declining each year.