What is the difference between car insurance agreed value and market value?

As part of your comprehensive car insurance policy, your insurer will want to determine how they value your car. They typically use one of two methods: market value or agreed value.

Market value car insurance may lower the premiums you pay, while agreed value car insurance may protect you from depreciation in the value of your car. Here’s how to decide which one is right for you…

What is market value car insurance?

Market value car insurance is simply how much your insurer deems the car is worth at the time your claim is submitted. The market value will determine how much your insurer will pay to replace the car if it is written off or stolen.

To determine the market value of your car, your insurer will compare it to how much cars of the same make and model are currently selling for. They’ll also factor in the car’s:

• Year of manufacture

• How many kilometers it has traveled

• Any pre-existing damage

However, as most cars depreciate over time, the market value of a car generally decreases over the term of your insurance policy.

What is agreed value car insurance?

Agreed value car insurance is the amount your insurer agrees to insure the car for. While this needs to be within a reasonable range of the market value, it is set at the start of the policy term and does not decrease over the term of the policy.

Typically, insurers are more likely to offer agreed value car insurance on cars that are: 

• Less than 10 years old

• Have no pre-existing damage

• The insurer may request a valuation, which you’ll need to obtain if you want to be covered for more than the maximum the insurer will allow

What is the difference between market value and agreed value?

The pros and cons of market value vs agreed value car insurance are important to understand in order to choose the right car insurance policy for you. 

The first thing to consider is the cost of the premiums you’ll pay. A market value car insurance policy will generally have lower premiums than an agreed value car insurance policy.

However, agreed market car insurance doesn’t depreciate (ie go down in value) over the term of the policy. That means you’ll receive the same amount if your car is written off later in the policy term.

Advantages of market value car insurance include:

• Lower premiums are great if you’re on a budget

• Older cars tend not to depreciate as quickly as new cars

Advantages of agreed value car insurance include:

• Protection against deprecation of new and higher value cars

• You’ll know exactly how much your car is insured for during the policy period

• Also note that insurers normally have an option to replace cars with like for like. Most will use this option first before cash settling a claim.

 At the time of writing, market value insurance could be more than agreed value insurance due to supply chain issues impacting new cars arriving in Australia. This means that second-hand car value has skyrocketed.

This may change in the near future, so review your car insurance regularly to make sure you’re not paying more than you need to.

How does my car insurance value affect a claim?

If you are involved in a car accident or your car is otherwise damaged, your car insurer will assess how much it will cost to repair the damage.

If the cost of repairs is greater than the market or agreed value of your car, then your car will be considered written off. That means it will need to be replaced rather than repaired. 

The market or agreed value of your car will determine how much your car insurer pays out to cover the cost of the replacement car.

The same applies if your car is stolen and not recovered. If theft is included in your comprehensive car insurance policy, your insurer will use the market or agreed value of your car to determine how much they’ll pay to replace it.

Is market value or agreed value car insurance better?

It’s not really a matter of which is better. It all depends on which is right for you. 

Compare Club’s team is here to help. We compare a range of insurers and car insurance quotes to find the right insurance for you. You can adjust your excess to lower your premiums with a few clicks, then pick the cover that works for you in just a few minutes. 

It’s all part of our personalised approach to car insurance comparison. Whether you want lower premiums or a higher level of coverage, our team are here to make finding the right car insurance easy. 

Market value vs agreed value: which is cheaper?

This is kind of a double-edged sword. The premiums you pay for a market value car insurance policy will generally be cheaper than the premiums you pay for an agreed value car insurance policy.

However, an agreed value insurance policy will typically deliver a higher pay out if your car is written off or stolen.

So, it all really comes back to value. If you’re more interested in lowering your premiums and less concerned by depreciating car value, then a market value car insurance policy might be right for you.

On the other hand, if you don’t mind paying higher premiums in order to protect against depreciating car value, then an agreed value car insurance policy might be a better fit for you.

The bottom line

Market value or agreed value car insurance is a rating factor used by insurers that determines how much you pay for comprehensive car insurance. 

Market value car insurance typically offers cheaper premiums, but the amount your car is insured for may decrease over the term of your car insurance policy.

Agreed value car insurance typically comes with more expensive premiums, but the amount your car is insured for is set at the start of the policy term to protect you against deprecation during the policy term.

Whether market value or agreed value is better for you depends on what you value more in a car insurance policy. Compare Club’s team can compare a range of car insurance quotes to make it easier for you to choose the right policy for you.

Paul Coughran is the General Manager of Emerging Verticals at Compare Club. Paul has over 20 years of experience across a wide range of industries including Banking and Finance, Telecommunications and Energy. Paul leads a team of trusted experts dedicated to helping individuals make informed decisions about their insurance and utilities needs.

Meet our car insurance expert, Paul Coughran

Paul's top car insurance tips

• 1

  Regularly compare your insurance policies – You could be paying for cover you don’t need. Shopping around every so often can save you a fair bit, maybe even hundreds each year.

• 2

  Don’t just look at the premium—check the excess too. While a higher excess might bring down your premium, remember you’ll have to fork out more if you do need to claim.

• 3

  Double-check what’s included in your policy. Extras like windscreen cover or roadside assistance might not be part of the deal and could cost you more.

• 4

  If you don’t drive much, consider usage-based insurance. Some policies base your cost on how much you actually drive, if you work from home or only use your car for short trips this might be a much better option.