Motor Vehicle Insurance. Agreed Value. Lock it in.
Motor Vehicle Insurance. It's something most Australians are familiar with. For many their car is more than just a means of transportation. It becomes something they form a significant bond with. To that end most car owners have some form of insurance. Having dealt with hundreds of car insurance claims over my career in insurance I've seen the good, the bad and the ugly in this space. I thought it time that I share my number one tip when insuring your car.
Make sure you have an agreed value!
*except for new vehicles where most insurers offer anywhere from 1 to 4 years of new for old replacement which trumps both market and agreed value. In this instance market value noting all modifications and accessories is fine. The default position with car insurance in Australia is a sum insured of "market value". This is a clever way your insurer can determine and beat down a pay out figure for your vehicle should it be written off during your period of insurance. If I had to guess I would estimate that at least 90% of policyholders have their car insured on this basis. This goes for both domestic and commercial vehicles. My preferred alternative to this is an "agreed value" which as the name suggests is a locked in figure that you will receive for the whole insured period if your vehicle is written off.
Everyone assumes their car is worth more than it is
The reality is that everyone thinks their car is worth more than what it probably is. I myself am guilty of this. For that reason, with nearly all written off car claims I've seen there is usually always a dispute in the payout figure offered by the insurer for customers that are on market value. Most of the time the difference might only be a few hundred dollars, but it can often be a gap of thousands of dollars. This leads to unhappy customers at a time where they're most vulnerable.
How agreed value differs from market value
Most motor vehicle insurers can offer agreed value if you ask for it. However, this is usually at an increased cost. I was going to draw a pretty graph to explain why this costs more but stay with me as I try to explain this with my words. Let's say you lock in an agreed value of $45,000 for your 5-year-old modified Toyota Hilux. For the whole of that insurance year you will be paid $45,000 (less any applicable excess) should the vehicle be written off. This differs from market value where you may (if you're lucky) get $45,000 in the 1st month of the year but might only get $39,000 should you write the car off in the last month of the policy period. Of course, there are other variables when deciding and shopping around on car insurance. Excess, Hire car option, Excess free windscreen, choice of repairer, repair network, claims processing time etc It's just my opinion that having that Agreed Value on vehicles outside the new for old replacement period makes the whole claims process run so much smoother. It also gives certainty and clarity that customers are looking for on their motor insurance. For a no obligation review of your motor vehicle insurance please feel free to get in touch with me at any time. Scott Norton Managing Director - Norton & Co Insurance Consultants General Advice Warning The information on this website is general advice only and does not take into account your personal circumstances, financial situation or needs. Please connect with an insurance broker to discuss your specific needs.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Scott Norton.