Agreed value vs market value Car Insurance

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. 

The key differences between insuring your car with an agreed value vs market value

What is agreed value Car Insurance? 

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. 

What is market value Car insurance? 

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.

How do you choose between agreed or market value?

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 want to know exactly how much you’ll receive for a total loss claim. 
• You don’t want to receive less of a payout because your car depreciated in value. This might be particularly useful if you have a car loan you need to pay off—you don’t want to come up short when making a total loss claim! 
• You want a policy that might help you replace your car with one equal in value to what you originally paid. 
• You’re okay with paying premiums that might be higher than those for market value Car insurance.  

You might consider market value if… 

• You’re happy to have the payout figure estimated based on your car’s condition, age, make and model at the time of the claim. 
• You don’t mind (possibly) receiving less than what you originally paid for the vehicle. 
• You’re okay with a policy that might only help you replace your car with one of a similar model and age at the time of the claim. 
• You want a policy where the premiums are generally lower than those for agreed value Car insurance. 

Is an agreed value policy only available for comprehensive Car insurance? 

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). 

Do I need to keep my car in a certain condition? 

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! 

So, what’s the verdict on agreed and market value policies? 

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. 

Where can I compare Car insurance policies? 

If you’re interested in finding Car insurance, then feel free to use our online comparison service to compare policies from a range of providers*, or call our friendly team on 13 19 20.

^{Sources:
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)}