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Market value vs agreed value car insurance

Two cars depicted side by side: one under a spotlight with text in front of it saying

When choosing your comprehensive car insurance, one of the key decisions is whether your car is covered for its agreed value or market value. This isn't just a small detail—it directly affects how much you could receive if your car is stolen or considered a total loss. 

This guide will help you understand the key differences between agreed and market value, along with the benefits and drawbacks of each, so that you can find a policy that aligns with your expectations.

Agreed value vs market value

When your car is written off, stolen and not recovered, or deemed a total loss, your insurance company will either replace it or reimburse you based on its value. This value is determined in one of two ways: market value or agreed value. Let's explore what each of these terms means.

Agreed value

Agreed value car insurance stipulates a specific value for your car that you and your insurer agree upon when you start your policy. For example, if at the beginning of the policy, you and your insurer decide your 2022 Toyota Corolla is worth $22,000, then that’s exactly what you’ll get—$22,000 (or a car of similar value)—if your Corolla is written off. It doesn’t matter if the car’s value has gone down over that timeframe, or if you’ve driven it to the moon and back.

These policies often come with a higher price tag because they offer the security of knowing exactly how much you’ll receive, without worrying about depreciation or damage reducing the payout.

Market value

If you choose a market value car insurance policy, on the other hand, you’ll receive exactly what your car is worth in the market at the time it’s written off or stolen. Continuing with the previous example, if your Corolla, initially valued at $22,000, has depreciated to $18,000 by the time of the incident, that's the amount you would be compensated. 

Market value takes into account the car's wear and tear, mileage, and any market fluctuations that have occurred since you first insured the vehicle. 

These policies tend to be cheaper since the payout tends to drop over time. However, this is not always the case as we saw during the COVID-19 pandemic when the value of some used vehicles actually increased due to supply chain issues affecting the availability of new cars.

Should I choose market value or agreed value?

Choosing between market value and agreed value car insurance is a personal decision, and the best option varies depending on individual circumstances. Let's break down the pros and cons of each, along with who might benefit most from either option, to help guide your choice:

Good For
Market value car insurance
Lower premiums due to alignment with the car's current market value.
Payout is less predictable and might be less than expected due to depreciation and market conditions.
Owners of older vehicles where depreciation has slowed.
Those seeking more affordable premiums with some payout uncertainty.
Agreed Value car insurance
Fixed payout amount provides certainty on the compensation you'll receive.
Higher premiums due to the guaranteed payout amounts.
New car owners, individuals who value their car highly or have significant modifications.
Those with financed cars, to mitigate loan discrepancies.

Choosing between market value and agreed value car insurance boils down to your personal preference for payout predictability versus lower premiums. Whatever you decide, just make sure it gives you the right balance of coverage and value for your needs.

Brad Buzzard
Brad Buzzard
Senior Money Writer

Brad brings over 25 years of experience in writing and consumer research to Mozo, using his RG146 certification for Generic Knowledge and Superannuation Brad has a knack for translating complex policies, to deliver practical guidance on financial matters. Brad has been featured in The Australian, B&T, Mumbrella, and Asia Insurance Review, and his insights have influenced the strategies of some of the world's biggest brands including McDonalds and Proctor & Gamble.

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