Insurers require purchase price

wudhut

My latest used car was bought from a family member well below its current market value.

The insurers application form asks for the declaration of the purchase price. How do the insurers use this information, especially in the event of an accident claim where the vehicle is deemed to be beyond economical repair.

These particular circumstances will never occur again and if I find I have to replace the car via a pay out based on the purchase price, I will be severely out of pocket

dacouch

The amount you put down is the maximum they will pay you, in the event of a claim they will pay you the market value.

In the event of a claim the Insurer will often try and pay you a lower amount as you bought it for less but the ombudsman will normally rule in your favour.

Here is a quote from the ombudsmans site which relates to this

We are likely to award the policyholder the full retail value, even if he/she inadvertently under-estimated the value of the vehicle when filling in the proposal form or luckily bought the vehicle for less than it was worth. And we have seen exceptional cases where a vehicle’s value genuinely rose between the date it was bought and the date of the damage/theft.

http://www.financial-ombudsman.org.uk/publications/technical_notes/motor-valuation.html

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/22/issue-22-motorinsurance.htm

In your case it may be worth putting the purchase price and then putting a note in that it was bought below market price due to family and current market price is circa x

BruceyBonus

Don't most sites ask for the current market value (instead of the purchase price?)

wudhut

This insurer requires both: the 'price paid' and 'present value' which is why I am concerned.
As dacouch suggests I suspect they want it both ways!

dacouch

Put it down like I suggested, they will probably query it as there are a lot of people who work in the Industry are not aware of how the Ombudsman views this. If they do just point out the Ombudsmans view on it (As per my links) and they should relent.

It sounds like you are taking a policy out with Highway