If someone steals your car or your car is written off, it is important to understand your options when renewing or acquiring car insurance. These options include market value and agreed value.
If you don’t know what insuring your car at market or agreed value means, you’re not alone.
In this guide, we will break down the advantages and disadvantages of market value and agreed value so you can make an informed decision on which cover is going to suit your situation best.
Agreed Value vs Market Value
If your car is written-off or stolen, meaning you are left without a car, market value or agreed value is the amount your car is insured for. It determines how much compensation you will receive from the loss of your car.
Market Value
Insuring your car for market value means that you will be provided with compensation to replace your car based on its worth ‘in the market’. This compensation is determined by your insurer and is assessed based on your car at the time it was lost or damaged. The make, model, age, odometer, and overall condition of your car will also be taken into account.
Insuring your car for market value will generally involve cheaper premiums than if you selected an agreed value. Why? Because the market value of your car depreciates over time and therefore an insurer will estimate what they think your car was worth before it was damaged, which is typically lower than what you bought your car for.
Agreed Value
Conversely, by insuring your car for an agreed value, you will be covered for an amount your insurer agrees your car is worth, regardless of its depreciation during the policy. Under an agreed value insurance policy, if your car is written off or stolen and not recovered, you will know how much money you will receive from your insurer.
Which is better - Market Value or Agreed Value Car Insurance?
Whether to opt for market value or agreed value car insurance should depend on your personal circumstances. However, generally, when trying to determine whether to insure your car for market value or agreed value car insurance, there are two main factors to consider. How much do you think your car is worth in relation to the market? And how much do you want to spend on premiums?
By insuring your car for market value, you are more likely to take advantage of cheaper premiums, but potentially receive less than what you paid for it initially. Market value car insurance is generally more suitable for older vehicles where depreciation and wear and tear is significant.
If your car is a reasonably modern model, or has received certain modifications, the market may not reflect the actual worth of your vehicle. In this circumstance, you can have it insured for replacement at a specified value if you need to make a total loss claim, also known as agreed value. Under an agreed value policy it is important to be aware that your premium will generally be higher than if you opted for market value.
Closing Thoughts
When making the choice between market value and agreed value car insurance, you need to determine the best decision for your specific financial situation. Older cars are usually more suited to market value insurance which offers cheaper premiums, but provides compensation based on the car’s worth at the time it was lost. Because your car’s worth decreases over time, so will the amount of money you will likely receive. Newer or modified vehicles where the true value is not accurately reflected by the market, will often find agreed value insurance more beneficial. Agreed value insurance offers a set payout which is agreed upon with the insurer at the beginning of the policy, regardless of depreciation.
Seeking Car Insurance That Works for You? Jade Finance supports customers with all aspects of their motor vehicle purchase.
Providing general advice on car insurance, our expert brokers are committed to helping our customers wherever possible, from initial contact right through to settlement. Insurance and lending are key sectors in the Financial Services industry, and while we’re not insurance brokers nor are we aligned with any insurance company, our expert loan consultants are extremely knowledgeable on insurance matters.
For more information, get in touch with us today! Connect with one of our brokers online or by phone on 1300 000 008.
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