Insuring your car on Market Value vs Sum insured

For most of us when we purchase comprehensive car insurance, the basis of the coverage for our car is that of “Market Value”. But sometimes, you notice that the quotation you received indicates “Sum Insured”. Your choice of policy will impact the amount of the insurance pay-out should you file a claim for theft or total loss.

Let us explain these terms in detail below. 

What is market value car insurance?

Market value car insurance is generally the go-to method for valuing a car. Your insurer will use the information they have about your vehicle to calculate its probable value in the current open market at the point of total loss

To determine the market value for your car, they will look at the price of cars on the open market that are the same as yours, or as close as possible in make and model, and calculate an average price. The market value is derived from several different sources depending on the insurers, but it usually consists of a mixture of using online portals such as SGcarmart, and the expertise of a motor surveyor. 

The premiums tend to be lower than insuring your car for a higher sum insured. However, there is a level of uncertainty about what compensation you will receive from your insurer if your car is written off. If you dispute the amount your insurer assigns your vehicle’s worth, you can speak with the insurer or if the dispute escalates, to the Financial Industry Disputes Resolution Centre.

What is Sum Insured car insurance?

Sum insured is offered more often for supercars, high value cars, and rare cars, where the valuation for such cars can be a wider range. To provide clarity Sum Insured car insurance is where you and your insurance provider agree to insure your car for a set value when you take out a policy. The sum insured amount offered to you is pre-calculated based on your car's model, year, and several other factors at the point of purchase. This way, you know exactly what the pay-out will be if your car is a total loss.

The premiums tend to be higher than insuring your car for market value. Agreed value can provide certainty about what compensation you will receive from your insurer if your car is written off or stolen. There is flexibility around the amount that your car is insured for.

Market Value or Sum Insured is better?

For cheaper insurance premium market value is the better option. If you want peace of mind of the coverage of your car, without worrying about depreciation, Sum Insured is the better choice. 

Comparison of Market Value vs Sum Insured

Market Value

Sum Insured

Cheaper Option

More expensive option

Easily available

Less available option

Valuation decreases with depreciation

Valuation is fixed and maintained

Less clarity of total loss pay-out

Clarity of total loss pay-out


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