Depreciation is when the value of something decreases over time due to natural wear and tear. In insurance, depreciation is usually associated with cars.
Why does my car depreciate in value over time?
Your car will start losing value as soon as you drive it off the showroom floor. This is mainly because of wear and tear, but also because new models are released regularly, meaning the demand for older models goes down, which in turn reduces the resale value of your car.
What value is my car insured for?
The value that your car is insured for will vary between insurers but the three most common values from highest to lowest are:
- Retail: the average amount that a car dealership would sell your car for.
- Market: the amount that you would sell your car for if you were to sell it privately.
- Trade-in: the amount a car dealership would pay you for your car if you were to trade it in.
What value will my classic car be insured for?
For classic cars, your insurer would generally ask you to provide the value you want to insure your car for. This would usually require you to get a valuation from a car dealership. Your car will then be insured for that.
