Car Insurance – Market Value vs Agreed Value
When requesting a quote for a car insurance policy you generally have the choice between insuring your vehicle for its market value or for an agreed value should it be written off or stolen. The biggest difference between market value vs agreed value is how much money the insurer will give you to buy a replacement.
What’s the difference between market value and agreed value?
What is market value?
‘Market value’ is an insurance industry term for what your car would fetch on the open market at the time of making a claim based on the age and condition of your vehicle. The market value is:
- not the trade-in value
- not what a particular purchaser, such as a collector, would pay for your car
- not the cost of replacing your existing car with a brand new one.
So if you insure your car for market value, the price you will receive from the insurer in the event that your car is written off or stolen will be the price that your insurer estimates your car was worth immediately before the accident or theft.
When estimating the market value of your car, your insurer will consider a range of factors, including make and model, age, condition, kilometres, and service history.
Market value in summary:
- The amount is based on your insurer’s estimate of what your car is worth on the open market just before the accident/incident.
- Premiums tend to be lower than insuring your car for a higher agreed value.
- There is a level of uncertainty about what compensation you will receive from your insurer if your car is written off.
- You have no say around the amount that your car is insured for.
What is agreed value?
‘Agreed value’ is a sum that has been fixed after discussion and agreement between you and your insurer when you take out or renew a policy. The agreed value includes any modifications, options or accessories that are attached to your vehicle.
An agreed value car insurance policy generally has higher car insurance premiums, as the agreed value for your car is usually higher than what it would sell for on the open market (market value).
Market value in summary:
- The amount is based on what you and your insurer agree to.
- Premiums tend to be higher than insuring your car for market value.
- The agreed value can provide certainty about what compensation you will receive from your insurer if your car is written off or stolen.
- You have a say around the amount that your car is insured for.
If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.