Market Value vs Agreed Value Car Insurance
Agreed value car insurance gives you more control over how much you’re covered for, but market value is usually cheaper.
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When you take out car insurance, you sometimes get to choose between insuring your car for its market value — a figure based on what your insurer estimates your car was worth — or an agreed value, a specific amount you and your insurer agree on. With agreed value, there's less chance of you being underinsured, but your premiums are likely to cost more.
Compare policies with agreed and market value
How do they compare on price?
Agreed value policies typically cost more for two reasons:
- The agreed value sum insured is typically higher than the market value sum insured. A larger sum insured comes at an additional cost.
- 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
- 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.
- 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
- 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.
- 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 option is 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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