Understanding agreed value and market value car insurance
Tips for understanding agreed and market values from our car insurance expert, Adrian Taylor
Adrian Taylor
Executive General Manager – General Insurance
Weigh up your options
If you’re looking for the peace of mind that comes with knowing how much you could receive from an insurer in the event of a write off, agreed value could be for you. However, not all insurers offer agreed value and those that don’t will simply apply market value at the time of the accident. You should contact your insurer to discuss this if there are any doubts or read your PDS.
Compare like-for-like policies
When shopping for a new car insurance policy at renewal time, make sure you are comparing apples to apples. This means that if you’re on an agreed or market value policy currently, make sure the policies you’re comparing use the same valuation method as well as the same excess, optional covers and payment frequency.
Contact your insurer around renewal time
If you have an agreed value policy, the amount the car is valued for may change automatically every year when the policy renews. Your insurer will provide this information in your renewal notice. Make sure you contact them if you need to negotiate a different price at renewal time.
Market value vs agreed value car insurance
What is market value car insurance?
Market value car insurance is generally the go-to method for valuing a car. Your insurance provider will use the information they have about your vehicle (e.g. make, model, age, condition) to calculate its probable value in the current market should you need to claim for your vehicle’s total loss or write-off.
To determine the market value for your car, your insurance provider may look at the price of cars on the open market that are the same as yours, or as close as possible in make and model, and calculate an average price. This figure is what you could receive if you’re covered and your car is wrecked beyond repair (or the repairs will cost more than the car’s worth).
Is market value the same as trade-in value?
Market value is not the same as trade-in value. Trade-in values are determined by car dealerships when you bring in a current vehicle and plan on purchasing a new one, whereas market values are based on what cars like yours are selling for on the market (both new and used cars).
What is agreed value car insurance?
Agreed value car insurance is where you and your insurance provider agree to insure your car for a set value when you take out a policy. This way, you know exactly what the payout will be if your car is a total loss.
The agreed value amount won’t be specified in your Product Disclosure Statement (PDS), but will be in other policy documentation (like your Certificate of Insurance).
What’s the difference between agreed value vs market value car insurance?
The main difference between agreed value and market value is how much and how often the market value of your car can change compared to an unchanging, fixed value.
Another key difference is that agreed value car insurance is not available on every policy. It’s more common with comprehensive car insurance, but rarely available with any other level of cover.
The pros and cons of market value and agreed value car insurance
There are advantages and disadvantages to both car valuation methods, which we have highlighted below.
| Agreed value car insurance | |
|---|---|
| Pros | Cons |
| Clarity over how much you’ll be paid for your car’s total loss | May cost more in premiums than market value |
| Avoid impacts of market depreciation | Less available option than market value |
| Market value car insurance | |
|---|---|
| Pros | Cons |
| Premiums may be more affordable than agreed value | Subject to market depreciation |
| Common choice across all levels of cover | Less clarity of what your payout may be |
Is it better to insure your car for market value or agreed?
Deciding whether agreed value or market value car insurance is the better choice for you depends on your situation. You may find that if you have a car loan or a brand-new car an agreed value comprehensive car insurance policy could suit you.
This is because brand new cars depreciate in value quickly, so taking out car insurance with an agreed value can help protect you against the financial impact of depreciation should you need a payout to purchase a similar vehicle after a write-off. Similarly, if you have a car loan, an agreed value policy may help you pay off the loan should the car be deemed a total loss after an incident.
On the other hand, if your car is paid off and you’ve had it for a number of years, you may decide that market value car insurance is best because it’s more affordable and you don’t need any of the advantages of agreed value car insurance.
Purchasing agreed value or market value car insurance
Can I choose agreed value or market value with third party car insurance?
It’s extremely rare to find agreed value car insurance options on Third Party Property Damage (TPPD) or Third Party Fire and Theft (TPFT) policies, but not impossible. Generally speaking, it’s only an option reserved for comprehensive, the highest type of car insurance cover.
This is because TPPD policies don’t normally cover damage to your vehicle (except in specific circumstances), so there’s little need to determine the value your car will be insured for. It’s easier to find agreed value TPFT car insurance as this level of cover insures you against certain events that damage your car, but it’s still uncommon.
Furthermore, Compulsory Third Party (CTP) car insurance only covers the costs and liabilities you have for any injuries you cause to other people. It doesn’t cover costs related to servicing or writing off your car so market value or agreed value insurance isn’t relevant when it comes to CTP.
Make sure you read the relevant Product Disclosure Statement (PDS) to understand the policy terms, features and exclusions. Also read the Target Market Determination (TMD) to ensure the policy is right for you.
What happens to agreed value car insurance at renewal time?
When your insurance renewal rolls around each year, you might find your insurer lowers your agreed value amount. You may be able to negotiate a different agreed value by contacting your insurance provider once you receive your renewal notice.
Meet our car insurance expert, Adrian Taylor
As Executive General Manager of General Insurance at Compare the Market, Adrian Taylor is passionate about demystifying car insurance for consumers, so they have a better understanding of what they’re covered for. Adrian’s goal is to make more information available from more insurers, to make it easier to compare and save.