How Does Your Car Vehicle Value Impact Your Insurance Premium?

How Does Your Car Vehicle Value Impact Your Insurance Premium?
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The value of your car is an important determinant of your car insurance quote. However, the role it plays is subjective to you, your vehicle and the insurance provider. If you are planning to buy a new car or wish to renew your car insurance in UAE, you probably would be wondering what the average cost of car insurance premium will be. We have a simple explanation -

Vehicle Value: Is it an Important Factor or Not?

This is one of the basic tips on car insurance premium calculation that we can provide to a car owner.

Car insurance companies in UAE consider a host of factors while computing your insurance premium. But, the value of your car is one the most important elements in this regard.

Your vehicle’s value can have a big (or small) impact on your insurance premium, but it is also conditional to other related factors like car make, model etc. For example-

  • If a driver is less than 25 years of age and has violated traffic rules in the past, then his driving history and age will have a greater influence on the insurance premium as compared to the value of his car.
  • If a driver is above 30 years of age and has had a clean driving history or/and claim-free records, the value of his car will play a major role in determining the car insurance premium.

The Premium for High-Value and Low-Value Cars

Buying a low-priced car doesn’t imply that you will get the cheapest car insurance in the UAE. It is not necessary that a car which has a lesser worth after years of usage will be cheaper to insure. So, this is one misconception that needs to be clarified.

You are probably thinking, why? Here’s the answer to your query -

  • The cost of insurance for low-value cars is more because they impose higher risks – especially if they are in a bad condition or have gotten involved in an accident.
  • Procuring their spare parts can be difficult, which increases the cost of repairing as well.
  • When the value of a car is evaluated, it is impacted by a lot of factors, such as the car make, model, age, fuel type, transmission type, engine size and other risk elements.

It may come as a surprise to you, but the insurance premium for a muscle car (which is relatively cheaper than an SUV) can be costlier than an expensive family SUV because of all the above-mentioned factors.

Why does Car Insurance Premium Rise Every Year but the Car’s Value Depreciate?

As you already know, the value of a car depreciates by AED 20,000 the moment it is driven out of the showroom. It will depreciate further with each passing year.

But, why does the cost of the premium go up every year?

The cost of the premium is increased –

  • if you have made claims before
  • if your car imposes more risks,
  • if there is no or less availability of spare parts

 It is also affected by other similar factors. Mentioned below are some of the key reasons –

  • Cost of Repairing- The cost of repairing will be same for a 2015 car model and a brand new, 2018 car model.
  • Inflation- As the prices go up every year, the cost of repairing your car will also go up with each passing year.
  • Driving history–The premium for a year is calculated on the basis of the claims made in the previous year.

Do Not Overvalue Your Car

If you overvalue your car while purchasing car insurance in UAE, you will end up paying a higher premium. At the time of accidental claims, the insurance provider will only consider its current market value.

In case there is a total damage, the insurance company will pay out the market value of the car instead of the sum assured.  And, you will only waste your money on high premiums and will not get any benefits in return.

Summing it up!

If you want to buy an affordable car insurance plan, simply searching cheapest car insurance UAE on Google will not help. You need to do some research to find the best deal possible. We have simplified it to help you understand better and make an informed purchase. So, the next time when you buy car insurance, do consider these factors before signing the deal.

 

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