When you’re insuring your vehicle, it’s hard to know how you can find the best deal. On top of that, it can be really confusing to understand all the jargon! Today, we’re going to focus on just one aspect of insuring your vehicle. After we do so, you’ll never be confused by it again.
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What is market value?
…Or at least, what it was worth before it was damaged. It’s worth is based on what similar cars in a similar condition are worth. And, if the car’s value changes over the course of a couple of months or years, your insurance will reflect this.
Say you insure your 10 year old Holden Commodore at market value. At the time, it was worth $8,000, but when you write it off, it’s only worth $7,000. That’s the amount you’ll likely receive if you damage the car beyond repair, or it’s stolen.
The value goes down as it depreciates, so you’ll tend to get less back in a claim the older the vehicle is.
You may still need to pay an excess, a one off payment to be made to your insurer before your claim can be paid out. That amount will vary, depending on what you agree with your insurer when taking out a policy.
What is agreed value?
Agreed value is an amount both you and your insurer agree on to insure the car for. Perhaps that 10 year old Commodore holds a special place in your heart, so you decide to insure it for an agreed value of $10,000 – above and beyond what it’s actually worth in terms of market value. That’s fine – you can do that!
And, you may get more money back in a claim than you would through a market value policy, because it pays the same regardless of your vehicle’s depreciation. Insuring it at agreed value does carry with it some caveats.
- As with market value policies, you may still owe an excess when claiming.
- You can insure your car for more than it is worth, but you may end up paying more each month in premiums. And, you can insure for less, and potentially pay a cheaper premium each month
- The amount you insure your vehicle for is honoured for the term of your insurance policy. This policy probably gets renewed every year though, and then it may revert to market value. Don’t worry though, simply call your insurer at the time of renewal and renegotiate the policy. Smart Australians review their insurance every year anyway!
Which is cheaper?
The price of insurance policies varies from company to company. Thus, we cannot definitively say market value is cheaper or more expensive than agreed value.
Agreed value can be less expensive if you insure your vehicle for less than it’s actually worth, resulting in a cheaper premium. But if you need to claim, you’ll get less back, so that may not be worth it.
And if you want it to be covered for more than it’s worth, you’ll pay more in premiums.
How expensive a market value insurance policy costs you, largely depends on how much your car is worth in the first place.
If saving on car insurance is your main priority, check out our 6 ways you can save on car cover.
Get the right cover for your vehicle
Want better insurance? Ask yourself better questions about the products you’re buying! Here are our suggestions.
- Is my car insured for the right amount of money? Ideally, you’d get back enough money to buy a vehicle like the one you lost.
- Does my policy include all the things I need? Think about your needs when comparing policies. You may need roadside assistance bundled into your policy, for example.
- Do I understand my policy? Make sure you carefully read each policy’s fine print.
- Have I found the best insurance for my situation? You can’t be sure, unless you’ve compared policies from different providers against one another. It’s easier than you think, and now is the time for you to compare car insurance.