Agreed Value vs Market Value Car Insurance
Renewing your car insurance can be tricky. One key question that people often ask is whether they should go for agreed value or the market value for their car insurance policy. It is helpful to understand the two terms and the differences between Agreed Value and Market Value:
Under an agreed value car insurance policy, you are agreeing the the value with your insurer when you take out your insurance policy. This agreed value won't change during the duration of your policy, which is typically 12 mths. The agreed amount is often reviewed at your renewal date of your policy. If you like certainty, then purchasing your car insurance with an agreed value can provide it. If your car is damaged beyond repair or stolen and not recovered, then your insurer should pay you the agreed amount. Agreed value amounts may differ between insurers, so it is worth considering this when purchasing your car insurance. Note: The agreed value amount that gets paid out by an insurer is typically less any outstanding premium payments, excesses or instalments that are owing.
Under a market value car insurance policy, the value of your car (and payout due) will be determined at the time of the claim. This means that your pay out from your insurer is decided at the time you make a claim. Again a payout may only occur if your car is written off, stolen and not recovered. The market value of cars can change during the time period in which your are insured. Typically most cars will see their market value decline over the years and even during year in which you are insured. The market value that an insurer will payout may or may not include such extra replacement costs such as transfer costs, dealer fees, excesses and stamp duty etc.
So where can you turn to help you make a decision? A starting point maybe to accessing some independent third party data to enable you to work out the potential replacement costs for your vehicle. Then once you have a handle on the potential replacement cost, then you can select car insurance with agreed value or market value to meet your needs. One source of third party data is Red Book, or alternatively, you could do some research on car classified sites such as Carsales or Drive. Can you remember what you usually choose? How did you make your decision?
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Andy Jamieson.