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You’ve already got plenty to consider when selecting car insurance. There’s the level of cover, the excess and an array of optional extras you might want to add to the policy. But when it comes to comprehensive car insurance, you’ll also want to think about how you’ll insure your car.
This is where agreed value and market value come into play. These are two different ways of insuring your vehicle and they can affect the premiums you end up paying—as well as the payout you get if you ever need to make a claim.
|Agreed Value||Market Value|
This is pretty straightforward. When you take out agreed value Car Insurance, your insurer agrees to pay a certain amount if your car is destroyed, stolen or written off.
That means that you’ll receive a fixed, set amount if you need to make a total loss claim. This doesn’t typically change over your policy term, even if your car depreciates in value. The agreed sum will generally stand until your policy is due for renewal.
Market value Car insurance is a little bit different. You don’t ‘agree’ to a sum with your insurer beforehand. Instead, if you make a total loss claim, your car gets covered for how much it’s worth on the market at the time.
An assessor will usually estimate its value when you make the claim, taking into account the car’s make, model and condition to arrive at a payout figure1. It’s important to note that because cars depreciate in value over time, this payout figure will usually be less than the original price you paid for the car.
The main point of difference between agreed and market value insurance is with premiums and payout figures. Neither value type is ‘better’ than the other. Instead, the choice comes down to your particular needs and what you want out of a policy.
Here are a few pointers to help you make your decision.
You might consider agreed value if…
You might consider market value if…
Generally speaking, yes.
Because comprehensive insurance is specifically geared towards covering your own car, it makes sense for the policy holder to settle on an agreed sum for a total loss claim. This isn’t usually something you would decide upon to cover the repairs should you damage someone else’s car.
That being said, many providers will give you the option to choose between value types when it comes to comprehensive Car Insurance. This is true for Budget Direct2, Virgin Money3 and ING4 (among others).
This may depend on the specific terms of your policy. As such, it is best to review your insurer’s Product Disclosure Statement (PDS), or speak to your insurer regarding the conditions of your agreed or market value policy.
That being said, many insurers will place some general exclusions on the policy where they will refuse to pay a claim. For instance, Budget Direct5 will not pay a claim if the insured car is ‘in any unsafe, unroadworthy or overloaded condition, unless this condition did not contribute to the loss or damage.’
Even if you keep your car in a safe and roadworthy condition, it might still be best to ask your insurer if you need to provide regular updates. Some might require immediate notice if the condition of your car changes6—even if you think it’s for something minor. Ask your insurer to be certain!
While some people may decide to take out market value policies because they’re generally more affordable, others may prefer the greater certainty offered by an agreed value policy. It’s very much a matter of what you prefer.
In either case, it’s also a good idea to check out the PDS before you decide on a policy as this will have information about the policy’s features, inclusions and exclusions. And these differences can be just as monumental as those between agreed and market value Car insurance.
1. Moneysmart - Agreed Value
2. Budget Direct - Product Disclosure Statement Part A (Under 'Policy Benefits and Options’)
3. Virgin Money - Product Disclosure Statement Part A (Under 'Policy Benefits and Options’)
4. ING - Product Disclosure Statement Part A (Under 'Policy Benefits and Options')
5. Budget Direct - Product Disclosure Statement Part A (Page 12)
6. Commonwealth Bank - Car Insurance Product Disclosure Statement (Page 11)