Insuring your car at its Fair Market Value could cut the cost of your insurance.

Over-insuring your car by putting too high a value on it and ignoring it's fair market value will result in nothing but wasted money.
Ask most people what they believe the value of their car to be and they’ll probably respond with the price that they paid for it. Depreciation costs however usually mean that the two figures are quite different. It's a sad reality that after a three year period, a new car is likely to be worth anywhere between 40% and 60% of its original value, depending on the make and model.
Take for example a 2010 1.8 TDCi Ford Mondeo with an original list price of €26, 695, you would expect it now, after three years, to be worth roughly 50% of its original value, in the region of €13,350. However, the decline in new car sales over the past few years has reduced the supply of available second hand cars so if you were now trying to buy a similar car you could expect to pay somewhere between €12,000 and €16,000. See our Value My Car  post for more information on how to get the current market value on any Irish or UK car.
When insuring a car this is the kind of information you need to know. You need to know where your car sits within that €4,000 euro band.

Insuring a car for a higher cost than its true market value, i.e. what someone is prepared to pay for it, will do nothing but potentially increase your premium and waste money.

Determining a Fair Market Value

In the event of a claim an insurance company will only ever compensate you for what you have lost. Hence if you over-value a car and pay a higher premium you still will not receive any more than the pre-accident value of your car in compensation. Unfortunately it doesn’t work both ways and if you under-insure your car you will only be covered up to the value you have specified.
If your car is written off or stolen, most insurers will usually pay you the 'market' value for the car but there's a process that the claim must go through first. Your car will need to be assessed by an automotive engineer  who will calculate the cost of repairing the vehicle against it's pre-accident value. If the repair bill is between 70 - 80% of the pre-accident value an insurance company may nominate to write it off. Special software such as Glassmatix will determine the cost of replacement parts but for a fair market value the majority of insurers turn to and our Pre-Accident Valuation solution.
Once written off your insurer will endeavor to settle at a fair market value for your car. It’s important to remember that the amount offered will be based on the true replacement cost of your vehicle as well as its pre-accident condition. It won't matter at this stage what value you placed on the car when you insured it so it's best to ensure before you renew your policy that you have determined the correct market value.