Car Insurance Decoded: Market Value vs. Agreed Value

Agreed Value tick. Toy car driving over coins

Choosing the right car insurance policy involves deciding between insuring your vehicle for its market value or opting for an agreed value in the unfortunate event of it being written off or stolen. Understanding the difference between market value and agreed value is crucial, especially when it comes to determining the compensation you’ll receive for a replacement.

Market Value Explained: ‘Market value’ in the insurance industry refers to what your car would fetch on the open market at the time of a claim, factoring in its age and condition. It is not the trade-in value, the price a collector might pay, or the cost of replacing your car with a brand new one. Insuring your car for market value means the insurer will estimate its worth just before the accident or theft based on various factors such as make and model, age, condition, kilometres, and service history.

Key Points about Market Value:

  1. Amount based on the insurer’s estimate of your car’s market worth just before the incident.
  2. Premiums are typically lower than insuring for a higher agreed value.
  3. Uncertainty about the exact compensation for a written-off car.
  4. No control over the insured amount.

Agreed Value Demystified: ‘Agreed value’ is a fixed sum agreed upon by you and your insurer during policy initiation or renewal. This amount includes any modifications, options, or accessories attached to your vehicle. Agreed value insurance policies often come with higher premiums since the agreed value is generally more than what your car would fetch on the open market.

Key Points about Agreed Value:

  1. Amount based on mutual agreement between you and your insurer.
  2. Premiums are typically higher compared to market value insurance.
  3. Provides certainty about compensation for a written-off or stolen car.
  4. You have a say in determining the insured amount.

Choosing between market value and agreed value insurance involves weighing the trade-offs between lower premiums and potential compensation uncertainty versus higher premiums and assured compensation. If you have any queries or need assistance with car insurance decisions, feel free to contact our office at 1300 620 345.