If your car got stolen today how much would your insurance pay? The answer depends on whether you selected cover on the retail value or market value basis.
Retail value: The amount that a car dealership would sell your car’s make and model for.
Market value: The amount you would be able to sell your actual car for.
The retail value is almost always higher than the market value. This is because the market value of your car would be affected by the mileage, vehicle condition, service history and any accident reports on it. Due to this, the insurance premium you pay when you select cover on the retail value basis is more expensive.
The lower premiums associated with market value cover result in 2 major disadvantages.
- If you ever lost your car – the amount paid by the insurance policy could be significantly less than the amount required to buy the same car from a dealership.
- If you still owe the bank, the amount paid by the insurance company could leave you without a car and with a large balance still owing to the bank.
The type of cover you choose will depend on your current affordability of premiums and the level of protection you require but generally speaking, retail value provides greater peace of mind.