Understanding agreed value and market value car insurance
Tips for understanding agreed and market values from our car insurance expert, Adrian Taylor
Adrian Taylor
Chief Executive – General Insurance
Weigh up your options
If you’re looking for the peace of mind that comes with knowing exactly how much you’ll receive in the unfortunate event of a write-off, agreed value could be for you. However, not all insurers offer agreed value and those that don’t will simply apply market value at the time of a car insurance claim. If you have any doubts, you should contact your insurer or read your Product Disclosure Statement.
Compare like-for-like policies
When shopping for a new car insurance policy, make sure you’re comparing apples to apples. If you’re on an agreed or market value policy currently, make sure the policies you’re comparing use the same valuation method as well as the same excess, optional covers and payment frequency.
Contact your insurer around renewal time
If you have an agreed value policy, the amount your car is insured for may change when your policy renews. Your insurer will provide this information in your renewal notice. Make sure you contact them if you need to negotiate a different agreed value.
What is agreed value car insurance?
Agreed value car insurance is a policy that insures your car for a set value. This gives you a clearer idea what the payout could be if your car is stolen or written off, and your claim is successful. Agreed value car insurance premiums are generally higher than market value.
The agreed value of your policy will be listed in your Certificate of Insurance.
Does an agreed value policy depreciate?
No, the agreed value of your policy remains fixed during your active policy term and may be updated by the insurer at renewal.
What happens to agreed value car insurance at renewal time?
Your insurer may revise your agreed value amount and potentially lower it when your policy renews. However, you may be able to negotiate a different agreed value by contacting your insurance provider.
What is market value car insurance?
Market value car insurance is not a fixed, pre-agreed sum but instead insures your car for what it would likely have sold for just before the claimable event (such as theft or a write-off). Premiums for market value insurance are usually lower than agreed value insurance.
Because your car’s market value will be determined at claim time using factors such as age, condition, mileage and market prices, the payout amount isn’t agreed in advance and usually decreases as the car depreciates.
How do insurers determine the market value of a car?
Your insurance provider calculates the market value of your car by looking at the price of same or similar cars on the open market. Insurers may also gather information from industry publications and other data sources to help set the market value of your car.
Your car’s market value typically won’t take into account registration and Compulsory Third Party insurance costs, stamp duty, warranties and dealership charges.
Is market value the same as trade-in value?
No, market value is different to trade-in value. Market values are based on what similar cars are selling for on the market and are how much the insurer will pay you at claim time if your car is written off. Trade-in values are determined by car dealerships when you bring in your current vehicle and plan on purchasing a new one.
Market value vs agreed value car insurance
What’s the difference between market value and agreed value car insurance?
The main difference between market value and agreed value car insurance is how your insurer covers your vehicle in the event of a total loss. Market value policies will pay the current market value of your car, which your insurer determines when you claim, while agreed value policies have a fixed payout amount, which is set when you buy cover.
Another key difference is that agreed value car insurance is not available on every policy. It’s typically only offered with comprehensive car insurance policies.
Is it better to insure my car for market value or agreed value?
Agreed value might be worth considering if you have a new or financed car, whereas market value might be more suitable if your car is older, fully paid off or of lower value. Whether agreed or market value will suit you best will depend on your situation.
Taking out an agreed value policy could help protect you against the financial impact of depreciation. It may also help you pay off your loan should the car be deemed a total loss after an incident. However, it’s typically more expensive than market value cover.
Can I choose agreed value or market value with third-party car insurance?
No, third-party policies generally only offer market value cover, since they only provide financial protection for your vehicle in specific circumstances. Third Party Fire and Theft car insurance typically only covers your vehicle if it’s stolen or catches fire, while Third Party Property Damage may only cover your car in very limited instances. Agreed value is generally only available with comprehensive cover.
Make sure you read the relevant Product Disclosure Statement to understand the policy terms, features and exclusions. Also read the Target Market Determination to ensure the policy is right for you.
Meet our car insurance expert, Adrian Taylor
As a General Insurance expert with over 13 years’ experience in financial services, Adrian Taylor is passionate about demystifying car insurance for consumers, so they have a better understanding of what they’re covered for. Adrian’s goal is to make more information available from more insurers, to make it easier to compare and save.