Should I insure my car for Retail, Trade-in or Market Value

Possibly the most important consideration when taking car insurance is how much you will be paid out if your car is stolen or written off.  In other words, if you need to completely replace it.

This is often a source of confusion among policy holders, and it can come as a real shock to someone to find out that they will be paid out less than they thought when they actually make a claim.

So it’s essential to understand the different types of values against which you can insure your car.

Many South Africans don’t understand that you can insure your car for different values, but in order to understand how your premium will be calculated, it is important to understand the difference between retail, trade or market value.

What is the retail value of your car?

The retail value is what your car would sell for if you were to buy it from a dealership. The retail price is usually also the closest value to the replacement cost of the car, and the value most insurers choose to insure a car for.

What is the market value of your car?

The market value of a car is almost always lower than the retail value and takes into account a number of variables, including mileage, vehicle condition, service history and accident reports. If you were to sell your car privately, the market value would be the price that you could likely sell it for.

What is the trade-in value of your car?

The trade or book value of a motor vehicle represents the average price that a dealership would pay for your car.

So, in insurance terms, market value is the average of retail value and trade value added together. If the retail value is R300 000 and the trade value is R220 000, the market value is R520 000/2 = R260 000.

Arguably, the retail value is the best option because it’s the average amount that a dealer would sell your car for if it’s stolen or written off in an accident. And this amount is usually higher than the others and results in a value that you could likely sell your car for if you were to do it privately

If there are any uncertainties or questions, please feel free to contact us.

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