.svg)
Agreed value vs market value car insurance
Agreed value vs market value car insurance
Written by
Kervin Mathew
Edited by
Ellie Garran
Reviewed by
Adrian BennettCompare car insurance policies the easy way
Save time and effort by comparing a range of car insurance quotes with iSelect
What is agreed value car insurance?
Long story short
Agreed value cover locks in a fixed payout for total loss claims
You’ll know exactly how much you’ll receive if your car is written off, but premiums are generally higher.
Market value cover bases your payout on your car’s worth at the time of the claim
Your car’s market value, including depreciation, helps determine payout amounts for total loss claims.
Agreed value cover is typically only offered with comprehensive car insurance
Insurers may let you choose between agreed and market value when choosing comprehensive cover.
What is agreed value car insurance?
Agreed value car insurance is a coverage option on most comprehensive car insurance policies that allows you to lock in your sum insured (the amount your car is insured for) until your policy ends or is renewed. When you take out agreed value cover, your insurer agrees to a fixed payout in case of a theft or write-off. This means that your car’s depreciation over the policy term has less of an impact on your payout if you make a total loss claim.
Generally, agreed value cover might suit someone who wants more certainty with their payout in case of a total loss claim, and doesn’t mind paying a higher premium for it.
What is market value car insurance?
Market value car insurance calculates your payout based on how much your car is worth immediately before the incident claim. It’s typically the default option for comprehensive car insurance policies. If you make a total loss claim and you have market value cover, your insurer will calculate your cover based on how much your car is worth on the open market at the time. This amount won’t typically include other costs like warranty or stamp duty.
If you have market value car insurance, when you make a claim, an assessor will usually estimate the value of your vehicle, considering its make, model and condition to arrive at a payout figure. Because cars lose value over time, this payout figure will usually be less than the original price you paid for the car.
Key differences between agreed value and market value car insurance
Agreed value cover costs more but offers the peace of mind of knowing that your payout is a set amount that won’t be affected by the market value of your car. Market value cover might be cheaper, but your payout for a total loss claim will be based on your car’s market valuation at the time of the claim, which tends to be less than what you paid for it.
Agreed value
- Premiums are generally higher.
- Payouts stay the same over the policy period.
- You’ll (usually) know how much you’ll get for a total loss claim.
- Payouts are unaffected by depreciation during the policy period.
Market value
- Premiums are generally lower.
- Payouts depend on the car’s estimated value at the time of the claim.
- There’s less clarity regarding the payout amount for a total loss claim.
- Payouts typically go down with depreciation.
How do I choose between agreed value and market value cover?
Choosing between agreed value and market value cover comes down to whether you want certainty with your payout or whether you’re willing to pay higher premiums to stop depreciation from lowering your payout. So, the choice depends on your particular needs and what you want out of your car insurance.
You might consider agreed value cover if you …
- want a fixed payout if you make a total loss claim
- don’t mind paying a higher premium for certainty with payouts
- are insuring a new car or one that you’ve significantly invested in modifying or maintaining.
You might consider market value cover if you …
- are insuring an older car that’s lost most of its market value
- prefer paying a lower premium over having certainty with your payout
- are okay with your insurer deciding your payout for a theft or write-off claim.
Helpful tip
Market value cover may be a useful option to consider for older cars or vehicles that have seen a lot of mileage. Typically, these vehicles will have already depreciated, and this can result in lower premiums. While you might not receive as much for a claim as you would under an agreed value policy, it may still be enough to cover the costs of a replacement car (so long as you’re not looking to upgrade to a Ferrari).
Toby Hagon
Motoring Journalist
Fictional scenario: How agreed value and market value cover works
Sharon and Lily bought similar cars at around the same time, each costing $30,000. But they chose differently when it came to car insurance.
Lily went with a market value policy that meant her insurer would decide what her insurance payout would be in case of a total loss. Lily paid $144 a month for this cover, which felt reasonable to her.
Sharon wanted a bit more certainty, though, and went with an agreed value policy where she and her insurer settled on $28,000 as her car’s value and her payout in case of a total loss claim. Her policy premium was a bit higher at $181 per month.
Fast forward 10 months, and Sharon and Lily took a road trip with both their cars, which took an unfortunate turn, resulting in both cars getting written off – thankfully, no one was injured.
When Sharon submitted her claim, depreciation wasn’t a factor because she had an agreed value policy. Her insurer paid her out for the agreed sum of $28,000 (minus the excess and other claim-related costs).
Lily’s claim went a bit differently. Her insurer assessed the market value of her car at the time and calculated her payout at $22,000 – thanks, depreciation!
So, while Lily saved around $360 a year in premiums compared to Sharon, she also lost out on roughly $6,000 in an insurance payout because she went with a market value policy.
Note: This scenario is purely fictional and doesn’t reflect true claim outcomes. The figures shown are indicative only and don’t represent quotes or guaranteed payouts. Actual amounts and outcomes may depend on individual or personal circumstances, policy terms and market prices. Always check the relevant product disclosure statement and policy details before you make a decision.
Is agreed value cover only available for comprehensive car insurance?
Generally, yes. This is because comprehensive insurance is specifically geared towards covering your own car, allowing you and the insurer to settle on an agreed amount as a payout if your car is written off. Third-party policies mainly focus on damage to other people’s cars, so in the instances that they do cover your own car (such as fire or theft), they usually settle claims at market value.
That being said, you can still choose market value cover with comprehensive car insurance if you prefer lower premiums and aren’t too concerned about your car’s depreciation.
Did you know?
If you take out a car loan, lenders might require that you get comprehensive car insurance as a way to safeguard their financial interest in the vehicle in case it’s written off or stolen. In the same vein, you might also prefer an agreed value policy if you have a car loan. It can help keep your payout as high as possible, helping lower your financial risk if an untimely write-off or theft leaves you with nothing but a loan balance to repay.
Do I need to keep my car in a certain condition if I have agreed value cover?
Yes, if your car is unsafe or unroadworthy, and its condition contributed to an accident, your claim could be denied. That’s why it’s a good idea to review your insurer’s product disclosure statement or speak to your insurer regarding the conditions of your agreed value or market value policy.
Even if you keep your car in a safe and roadworthy condition, it might still be best to ask your insurer whether you need to provide regular updates. Some might require immediate notice if the condition of your car changes, even if you think it’s for something minor – ask your insurer about this if you don’t want to leave it to chance!
Can I switch between an agreed value and a market value car insurance policy?
Some insurers allow you to switch between agreed value cover and market value cover, but it’s rare. With most insurers, you’ll need to wait until you renew or buy a new policy to switch from market value to agreed value or the other way around.
Word to the wise – if you’re cancelling or making changes to your existing policy, remember to factor in things like cancellation fees and other charges and the possibility of higher premiums. And because higher premiums are indeed a possibility, whether you switch policies or providers, it helps to compare a range of quotes so you’re getting a good deal on your car insurance.
So, what’s the verdict on agreed value and market value policies?
It very much depends on your car, your budget and what you prefer. While some people may decide to get market value policies because they’re generally more affordable, others may prefer the greater certainty offered by an agreed value policy.
In either case, it’s also a good idea to check out the Product Disclosure Statement and policy terms before you decide on a policy, as these will have information about the policy’s features, exclusions and conditions of cover, which can make all the difference when you’re deciding between agreed value and market value car insurance.
Where can I compare car insurance policies?
If you’re interested in finding car insurance, then feel free to use our online comparison tool to compare policies from a range of well-known car insurance brands in Australia. You can choose from three levels of cover: comprehensive, third-party property, fire and theft and third-party property.
Get started on comparing car insurance policies!
Save time and effort by comparing a range of car insurance quotes with iSelect
iSelect General Pty Ltd (ABN 90 131 798 126. AFSL 334115) has partnered with Compare the Market (ABN 83 117 323 378. AFSL 422926) to compare a range of car insurers and policies. Not all providers in the market or all policies offered by the partners are compared and not all policies or special offers are available to all customers.
A number of our participating general insurance brands are arranged by Auto & General Services Pty Ltd ACN 003 617 909 on behalf of Auto & General Insurance Company Limited 111 586 353, both of which are related entities of iSelect Limited. Our relationship with those companies does not impact the integrity of our comparison service. Click here to view iSelect’s range of providers.
Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policy. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect. iSelect receives commission for each policy sold that is a percentage of the premium or a flat fee. Ask us for more details before we provide you with any services.