Should I insurance my car at retail or trade value? This question brings up an interesting point. There is debate as to what is the better way to base an auto insurance policy. Most people do not realize that they actually have the option to pay car insurance based on the market value of the car rather than the retail value of the car.

Ideally you should renew your auto policy twice a year. When you renew the policy the company takes the current value of the car, not what it cost at the time of purchase, and determines the rate of the premiums on the policy in question. By renewing your policy you can actually see a decrease in your premiums each period.

While most insurance policies are based on the trade value for the car they do not have to be. The thing that needs to be kept in mind here is that the value of the car depreciates as soon as it is taken off the lot and it continues to depreciate over the life of the vehicle. The insurance company is only going to pay a claim based on the replacement cost for the vehicle.

It is obvious to see from this information that since you’re only going to receive replacement value of is based on the market value of the vehicle it makes sense that you should only pay your premiums on the market value. The thing is that the insurance company I not going to tell you this, but if you renew the policy then they evaluate the renewed policy on the current value of the car.

By switching the way the policy is determined from being figured against the price of the car when you bought it to the amount that you would be able to get for it if you sold it, you can save a considerable amount of money. The fact that most people have insurance on the purchase price of their vehicle means that they are actually over insured.

In many cases an individual will not realize they can renew the policy and will just keep the original policy intact. If they have an accident and the car is replaced they will only receive replacement value based on resale not retail. Often the insurance policy holder is hocked that all they are receiving is the resale.

By renewing your insurance policy and having the premiums based of the trade value you keep your premiums in line with what they should be. One thing that often surprises the insured is that if they have a wreck that totals their vehicle and the amount owed on the vehicle is more than the amount of the market value they will personally be responsible for coming up with the rest of the money to pay the bank off. This is true regardless if the vehicle has been insured based on the retail.

The answer to the question of “Should I insurance my car at retail or trade value” can be answered simply by stating that to insure the vehicle at retail is to over spend on your premiums. This also means that you are over insured. Being over insured means that you not realize the value of the policy if replacement of the vehicle is required.