Car Insurance Market Value vs Agreed Value
Wondering what the difference is between agreed value and market value when it comes to your car insurance? Here is our guide to the ins and outs of agreed versus market value cover.
When requesting a quote for a car insurance policy you generally have the choice between insuring your vehicle for its market value or for an agreed value should it be written off or stolen. There are pros and cons to both types of cover, and it could help to consider these before making a decision.
What’s the difference between market value and agreed value
What is market value?
‘Market value’ is a recognised insurance industry term for what your car would fetch on the open market at the time of making a claim. It is determined by your insurer based on a number of factors. It’s important to note that it is:
- not the trade-in value
- not what a particular purchaser, such as a collector, would pay for your car
- not the cost of replacing your existing car with a brand new one.
So if you insure your car for market value, the price you will receive from the insurer in the event that your car is written off or stolen will be the price that your insurer estimates your car was worth just before the accident or theft.
When estimating the market value of your car, your insurer will take into account a range of factors, including:
- condition
- age
- make and model
- how many kilometres it has travelled
- its service and accident history.
Here is a quick rundown of market value:
- Amount is based on your insurer’s estimate of what your car is worth on the open market just before the accident/incident.
- Premiums tend to be lower than insuring your car for a higher agreed value.
- There is a level of uncertainty about what compensation you will receive from your insurer if your car is written off. If you dispute the amount your insurer assigns your vehicle’s worth, you can speak with the insurer or if the dispute escalates, to the Australian Financial Complaints Authority (AFCA).
- You have no say around the amount that your car is insured for.
What is agreed value?
‘Agreed value’ is a sum that has been fixed after discussion and agreement between you and your insurer when you take out or renew a policy. An agreed value car insurance policy generally has higher car insurance premiums, as the agreed value for your car is usually higher than what it would sell for on the open market (market value).
Here is a quick rundown of agreed value car insurance:
- Amount is based on what you and your insurer agree to.
- Premiums tend to be higher than insuring your car for market value.
- Agreed value can provide certainty about what compensation you will receive from your insurer if your car is written off or stolen. This may be particularly useful if you have a car loan or other form of finance still owing on the car.
- You have a say around the amount that your car is insured for.
Explore more: How to find the market value of your car
Compare Car Insurance with Canstar
If you’re comparing car insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old male seeking comprehensive cover in NSW without cover for an extra driver under 25. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the providers’ websites. Consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD), before making a purchase decision. Contact the product issuer directly for a copy of the PDS and TMD. Use Canstar’s car insurance comparison selector to view a wider range of policies. Canstar may earn a fee for referrals.
Products displayed above that are not “Sponsored or Promoted” are sorted by Canstar’s Star Rating and then alphabetically by company. Canstar may receive a fee for referral of leads from these products. See How We Get Paid for further information. If you decide to apply for car insurance, you will deal directly with an insurance provider, and not with Canstar.
Consider the provider’s detailed product and pricing information before making a decision to purchase a policy. The products displayed on this page do not include all providers and may not compare all features relevant to you. View the Canstar Car Insurance Star Ratings Methodology and Report. The rating shown is only one factor to take into account when considering products.
How does my car insurance value affect a claim?
If you make an insurance claim and the insurer decides to ‘write off’ your car, the difference between agreed value and market value car insurance becomes apparent. If you have an ‘agreed value’ policy, then your insurer would likely pay you the amount that you and the insurer had agreed the car was worth. If you have a ‘market value’ policy, the insurer would determine how much your car was worth on the open market and pay you that amount.
For example, let’s say you bought a new car for $30,000 and you have an accident. The car is written off by the insurer.
- Agreed value: You insured it for the agreed value of what you paid for it, $30,000. Your insurer would pay you the agreed amount of $30,000.
- Market value: The insurer would likely pay less than the purchase price of $30,000. The reason for this is that depreciation (the rate at which your car loses value over time) kicks in as soon as you purchase the car, and gets to work quickly. Your car is subsequently worth less and less as it ages, meaning that the amount your car is insured for under a market value agreement also reduces every day.
Compare Comprehensive Car Insurance
Is market value or agreed value car insurance better?
Deciding between agreed value or market value car insurance may boil down to two things: the car you drive and how much you want to spend on premiums. If your car is reasonably modern or has custom modifications and you would like to have enough to replace it in the event of an accident, you might choose to take out an agreed value policy. However, if your car is closer to retirement age or has lower value, you may decide that you would rather pay less in premiums in return for a lower payout should the car be written off, and opt for market value coverage.
Ultimately, there is no one right answer when it comes to deciding between agreed value and market value car insurance. It’s important to weigh up the benefits and drawbacks of each type of cover and what would work best for your individual circumstances before making a decision.
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This article was reviewed by our Editor-in-Chief Nina Tovey before it was updated, as part of our fact-checking process.
A journalist for more than two decades, Amanda Horswill has reported on a galaxy of subjects, including property, lifestyle, hyper-local news, data journalism, the Arts and careers.
She’s served as the Editor of Brisbane News, Deputy Features Editor for The Sunday Mail, Deputy Editor – Digital at Quest Community News, and a host of other senior positions at News Corp, prior to joining Australia’s biggest financial comparison website, Canstar.
Amanda is fascinated with the ever-changing world of finance. A passionate believer in the motto “knowledge is power”, she strives to translate the news into practical information that will help readers make informed decisions about their future. While at Canstar, her work has been regularly referenced by publishers such as the Sydney Morning Herald , The Age, The New Daily and Yahoo Finance.
Amanda holds a Bachelor of Arts (Journalism, Media Studies and Production, and Public Relations) and a Graduate Certificate in Editing and Publishing, from the University of Southern Queensland.
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