Market value vs agreed value car insurance explained
Agreed value and market value are two common ways insurers work out what your car is worth if it’s written off or stolen. This affects how your car is valued at claim time, so it’s worth knowing how it works before you choose or renew your cover.
Find the answers to:
If your car is written off or stolen, one of the biggest factors is how your car is valued. Most insurers use market or agreed value.
Knowing the difference can help you choose the right car insurance and help avoid unexpected gaps at claim time. Whichever option you choose, it’s worth remembering you’ll still need to pay the excess if you make a claim.
Related article: What is a car insurance excess?
What is market value?
Market value is the amount your car is expected to sell for, just before it’s damaged, stolen or written off.
In simple terms:
- It’s worked out at the time of the claim, not when you buy the policy
- It reflects the price similar cars are selling for in the current market
- Insurers often use pricing guides and recent sales data to estimate the value of your car
- They also consider the age, condition, kilometres driven and location
That means the payout can go up or down over time, depending on market conditions and depreciation.
How are car valuations worked out?
For market value policies, insurers typically check:
- Recent sale prices of similar cars
- Industry pricing guides such as Redbook
- Your car’s age, condition and kilometres driven
- Regional market differences
That’s why two similar cars might be valued differently at claim time.
Insurers may also consider your car’s make, model and optional features.
What is agreed value?
Agreed value is a fixed amount you and your insurer agree on when you start or renew your policy.
In simple terms:
- The payout amount is set in advance
- It doesn’t change during the policy period
- You know exactly what you’d get if your car was written off
- Agreed value provides certainty, but it might come with a higher premium
| Market value | Agreed value | |
|---|---|---|
| Value is set | At claim time | At the start or renewal of the policy |
| Does the value change over time? | Yes | No |
| Payout amount certainty is | Lower | Higher |
| The premium cost is | Often Lower | Often higher |
What’s right for you – market or agreed value?
Market value might suit you if:
- You’re comfortable with changes over time
- You prefer a more flexible or potentially lower-cost choice
- Your car is older and depreciating quickly
Related article: How to determine used car value
Agreed value may suit you if:
- You want certainty about your payout value
- You have a newer or higher-value car
- You have a loan on the car
- You prefer predictability if you make a claim
Helpful tips
- Review your insured value each time you renew your policy
- Track used car prices to help work out your car’s value in today’s market
- Consider how quickly your car is depreciating
- Make sure your cover still matches your needs
Summary
Choosing between agreed value and market value is about balancing certainty and flexibility. While agreed value can give you certainty upfront, market value reflects real-world conditions when you make a claim.
Reviewing your car’s value against your policy can help you decide. At the heart of it, we want to make sure your car insurance works for you.