Article 4: Insurance Valuation vs. Market Price

Why your "Sum Insured" might not be what you get paid.

You bought your Toyota Premio for KES 1.8 Million. It gets stolen. You expect a cheque for 1.8M. Instead, the insurer offers 1.5M.

You feel cheated. But in the eyes of the insurer, you haven't been cheated—you just misunderstood the Indemnity Principle.

⚖️ The Golden Rule:
In the event of a Total Loss, the insurer pays the Market Value at the time of the accident OR the Sum Insured, whichever is LOWER.

Market Price vs. Insurance Valuation

Market Price (What You Paid)	Insurance Value (What You Get)
The Showroom Price Includes the dealer's profit margin, tinting, alarms, and negotiation room. This price is often inflated by emotion and convenience.	The Intrinsic Value Determined by professional valuers (Regent, AA). They use depreciation tables. They strip away the dealer's markup to find the car's "real" value.

The Gap: That 200k difference between what you paid the dealer and what the valuer sees is usually not covered. It is considered a "commercial markup" that evaporates the moment you buy the car.

The Trap: Under-Insurance (Average Clause)

Some people intentionally insure their car for less to save on premiums. This is dangerous.

⚠️ The "Average Clause" Example

Scenario: Your Prado is worth 5 Million. You insure it for 2.5 Million (50%) to save cash.

The Accident: You have a minor accident. Repairs cost KES 200,000.

The Payout: Because you only insured 50% of the car, the insurer pays only 50% of the claim.

Payout = (Sum Insured / Actual Value) × Loss

Result: They pay KES 100k. You pay KES 100k from your pocket.

📊 The Verdict

Don't Over-Insure: If you insure a 1M car for 2M, they will still only pay 1M. You are just donating extra premiums.
Don't Under-Insure: The "Average Clause" will destroy you on small repairs.
The Fix: Get a professional valuation (KES 2,500) before you buy the insurance policy. Insure the car for exactly what the valuer states.

Why Your Insurance Valuation is Lower Than Market Price

Article 4: Insurance Valuation vs. Market Price

Market Price vs. Insurance Valuation

The Trap: Under-Insurance (Average Clause)

⚠️ The "Average Clause" Example

📊 The Verdict

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