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Market value vs agreed value car insurance

Agreed and market value car insurance: How are they actually different?

One of the many decisions you will encounter when picking a car insurance policy is whether you should insure your vehicle for an agreed value or for its market value.

  • Market value: The “standard” option. Your car is insured for its current market value at any given time, including depreciation.
  • Agreed value: You and the insurer agree on a specific value ahead of time. Your car is considered to be worth this much for the purposes of the insurance policy.

The value you decide upon is the sum insured, which is the total amount of cover you have. This amount will affect when your car is written off, repaired or replaced under the terms of your insurance policy.

If you are involved in an accident and the cost of your repairs is more than the sum insured, your car will be written off and you can claim the total value of the sum insured to spend on a new car, or not, as desired. If you’re in an accident and the cost of repairs is less than the sum insured, your car insurance will cover the cost of the repairs.

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Details Features
Comprehensive
Comprehensive
Low-cost, straightforward car insurance aimed at safe drivers
  • Costs of towing and storage
  • Lifetime guarantee on all repairs
  • Emergency repairs, travel and accommodation
  • Optional zero-excess cover for windscreen and window glass
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Comprehensive
Comprehensive
15% discount for comprehensive policies purchased online
  • New-for-old replacement
  • Trailer damage up to $1,000
  • Up to $500 for personal effects damaged in collision
  • Discounts for restricting policy to drivers of a certain age and over
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Comprehensive
Comprehensive
Buy online and save up to 10%. Price-beat guarantee for drivers aged over 25
  • Essential repairs and towing costs up to $500
  • Loss or damage while your car is in transit
  • Cover can be increased or reduced at any time if your circumstances change
  • Optional extras: roadside assistance, excess-free windscreen cover and hire car
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Comprehensive
Comprehensive
24/7 roadside assistance included in your comprehensive policy
  • Emergency fuel, replacement of flat tyre and battery service
  • Modifications like personalised plates, towbar and tinting covered
  • $1,500 to cover the cost of counselling sessions after a claim
  • Cover for work equipment carried inside vehicle and contents of caravan
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Comprehensive
Comprehensive
Save up to 10% when you buy online (T&Cs apply). Pay by the month at no extra cost.
  • Cover for accidents, fire, storms, theft, and damage to car
  • New car replacement in first 24 months
  • Guarantee on repairs for approved repairers
  • Up to $1000 lock and key replacement cover
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Price Saver (Comprehensive)
Price Saver (Comprehensive)
Save 15% when purchasing online. Eligible customers can receive 5,000 Velocity Frequent Flyer points before 31 December 2017
  • New-for-old replacement
  • Receive an alert by SMS if hail is predicted
  • Personal effects up to $500 after collision and theft
  • Optional 24/7 roadside assistance
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Comprehensive
Comprehensive
Premium product, without the premium price
  • Up to $20m in legal liability cover, plus protection for your car
  • Discount options for low km’s driven
  • New for old car replacement
  • No fees for monthly payments of policy cancellations
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Comprehensive
Comprehensive
Buy online and save up to 10% on your policy
  • $25,000 cover for accidental death
  • $500 cover for emergency repairs
  • Cover for legal costs
  • Temporary cover on replacement vehicle - 14 days
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Comprehensive - Elegant Cover
Comprehensive - Elegant Cover
Save up to 20% when you buy online
  • Up to $500 for personal effects damaged in a collision
  • Cover for modifications and accessories
  • Loss or damage while your car is in transit
  • Option of full reimbursement for replacing windscreen and window glass
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How do they compare on price?

Agreed value policies typically cost more for two reasons:

  1. The agreed value sum insured is typically higher than the market value sum insured. A larger sum insured comes at an additional cost.
  2. Your agreed value will stay the same over time, while the market value will typically decrease. This tends to reduce the cost of market value policies over time, while agreed value policies will not get the same benefit.

In addition to this, agreed value policies are not always available from standard car insurance providers. Agreed value may be available as an extra option that carries additional costs.

The benefits and drawbacks of agreed value and market value cover

The pros and cons of market value

Pros:

  • It’s usually cheaper.
  • Your sum insured is automatically updated to the standard market value.
  • You avoid paying more than you need to.
  • It’s typically more convenient.

Cons:

  • Your vehicle’s market value might be less than you think.
  • A well-maintained car might be undervalued according to the market value.
  • In the event of a claim, your payout may be considerably lower than an agreed value policy.

The pros and cons of agreed value

Pros:

  • You know exactly how much you are insured for.
  • You are able to insure your vehicle for less than its market value to save money.
  • You are able to cover the cost of modifications, aftermarket extras and other considerations.
  • You can choose your own level of cover to properly reflect the importance and value of your car.

Cons:

  • It typically costs more.
  • It requires some form of valuation.
  • Restrictions may apply to the age, value or type of car that can be insured at agreed value.

So which options best for me?

The right policy for you depends on your situation and you should always consider the benefits and drawbacks of each policy in line with your own needs. However, if you’re having trouble deciding, try considering the following situations:

  • Do you own a rare, vintage, modified or classic car? You probably want agreed value, as it will be much more accurate in reflecting of how much these kinds of vehicles are worth, including modifications and aftermarket extras.
  • Was your car expensive? If your car was a major investment, then agreed value is a good way of protecting it in the long run. With market value you may only be able to recover a fraction of the amount you paid in the event of a total loss.
  • Do you plan on getting a new car soon? Hopefully you won’t have to make a claim before then and you can save time and money by opting for market value.
  • Is saving money your top priority? If so, a cheap car insured at agreed value might be the right type of cover.
  • Do you need a car? Is your car absolutely essential for getting to work, or is it more of a convenience? If it’s a necessity, then agreed value means you know you’ll be able to afford a new one if your current car is written off. Market value may not provide you with enough of a claim payout for a suitable new car.

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Andrew Munro

Andrew writes for finder.com.au, comparing products, writing guides, sniffing out deals and looking for new ways to help people get the most out of their money.

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