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Agreed Value or Market Value Insurance

Car Insurance - Market Value or Agreed Value – what's the difference?

If you've recently applied for an online car insurance quote, you'll probably know that auto insurance can be both complicated and confusing. And what about the actual process of obtaining a quote? Should you get a quote for agreed value, or market value?

Read on as we attempt to answer that question.

Market value is a recognised industry term for what your car would fetch on the open market, as is. It is not, say, the trade-in value, nor what an unusual purchaser, such as a collector, would pay for your car.

Agreed value is a sum insured that has been fixed after agreement between the insurer and insured for the car.

If your car is "written off" in an accident, or stolen, the difference in how much the insurance company will payout between a Market and Agreed value policy will often be significant.

Let's look at some "what if" scenarios. Let's say you bought a two year old car for say $20,000 (its new price was $30,000) and insured it for the agreed value of what you paid for the car.

If your car was stolen that year, your insurer would pay the $20,000 figure, as the period of new car replacement was over and that was the value agreed to before the claim.

If you insured the exact same car for market value under the same scenario, the insurer is likely to pay out a lot less than the purchase price of $20,000. The reason for this is that depreciation has kicked in and the $20,000 car is worth less as time goes on.

Each month insurance companies use guides as the value of vehicles, "Glasses Guides" or "Red Book" values show a national average price of cars value, and in 99% of cases each month the value of the car becomes less. When a manufacturer releases a new model, the older models are worth less.

Think about car replacement cost
The question you need to think about is would this reduced amount be enough to replace your lost vehicle? Yes, you would have made a saving on your yearly premium, an Agreed Value Policy premium is more expensive that a Market Value Policy premium, but is it worth it?

It is worth shopping around for the best price on both and then decide what is going to suit you the best. Loans-Australia allows you to do just that, by entering in your details you can find and compare insurance premiums for the car you have, or looking to buy.

Get the Best Comprehensive Insurance Quote now.

If you drive a 10-year-old car, however, new replacement cost is not an issue and market value is entirely appropriate and so is the reduced premium cost.

Of course, this does not apply to vintage, classic or limited-edition cars which are insured through specialty companies.