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Market Value vs Agreed Value Car Insurance

Jacaranda Team

Jacaranda Team

December 21, 20205 minute read
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They are a few things that accompany a newly purchased car. One of these is insurance. The importance of car insurance cannot be overemphasized. There is the compulsory third party insurance but you also need comprehensive insurance to protect you from unforeseen debts and troubles, especially if you took a car loan.

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    Deciding to get car insurance is not the final step. There’s a lot of nitty-gritty to insurance and one of the first questions you’ll ask yourself will be if to get a market value or agreed value car insurance. The answer to this determines just how much you get in case of any unforeseen event. So which should you go for?

    What is market value car insurance?

    Market value insurance means insuring your car based on what it’s presently worth at the market. It is the value your car will fetch if it were up for resale on that day. The insurer takes a lot of factors into consideration before determining the market value. Some factors used by the insurer include; the age of the car, the model and the kilometres driven in its lifetime. It’s not necessarily the amount you paid for the car and it does not imply the cost of buying a brand new one.

    For example, let’s say you buy a car at $30,000 and insure it at market value, If you opt for this car insurance option, then the amount you’ll receive in case of an unforeseen event like theft or accident will be what your insurer estimates the market value to be.

    Pros of a market value car insurance

    • Market value insurance tends to have lower premiums because you’re insuring your car based on a value determined by the insurer. The market value placed by the insurer is likely to be less than the value you would have agreed with your insurer.
    • A market value insurance offers more convenience since you don’t have to update the insured sum.

    Cons of a market value car insurance

    • There is a level of uncertainty over how much you’ll be paid by the insurance company if your car gets damaged or stolen. You’ll surely receive a substantial amount but this may end up being less than what you expect or the amount you paid for your car because cars depreciate in value over time. The insured value you receive is mostly based on what price that same brand and model is going for in the market at the time of the accident.
    • Your insurer determines the amount you get, which may not be totally favourable to you. 

    What is agreed value car insurance?

    In this type of insurance, you fix a reasonable sum with your insurance provider. This is the value you both agree that the car is worth. Your payout if the car gets damaged or stolen would be the amount you specified at the signing of your insurance policy. It can also be updated and reviewed

    when you renew your insurance policy.

    Pros of an agreed value car insurance

    • Agreed value car insurance offers certainty as you’re sure that you’ll receive your agreed sum from the insurer, in case of any unforeseen event. You can have peace of mind knowing that you’ll get the exact amount you need. This might be particularly great if you’re still under a car loan.
    • It offers you more control and flexibility over your insurance. 

    Cons of an agreed value car insurance

    • The insurance premium tends to be more expensive because you’ll probably be paid more than the market value of your car, in the event of an accident.
    • It might be less convenient because you have to regularly review your policy and revalue your car.

    Which is better for you?

    This is not exactly a black or white decision. Whatever you decide totally depends on you and your current needs and wants. They’re two major factors you can consider to help you make a better decision; the type of car you drive and how much you want to spend on premiums.

    A market value car insurance is great if your car is old and not brand new. The depreciation would have slowed after some years, and your payout will most likely be large enough to cover replacements in case of theft or accidents. It also keeps your premiums down so you don’t have to be paying more than your car is actually worth.

    On the other hand, an agreed value car insurance will make more sense if you just got a new expensive car or a vintage car. This is particularly more useful if you took out a loan to get the car. Most people that opt for an agreed value car insurance have special attachments to the car or extra features that stand the car out. Newer cars depreciate faster than older cars. A market value insurance would not be a great option in this case, because of value uncertainty over time. You might want to buy a new car in case of an accident and your market value payout will not cut it. In this case, it is a good idea to sign an agreed car insurance policy as this offers you control, although at a cost.

    Also, if you just took out a car loan, the last thing you want is more debts in case anything happens to your car. It is also important to note continue checking and renewing your policy if you take out an agreed value car insurance. Some insurers might automatically revert your policy to market value. Ensure to check your policy carefully and sign with a trusted insurance provider.

    There is no shoe that fits all when it comes to comprehensive car insurance. Do your research and check the benefits and drawbacks of each policy to know which is best for you and your present financial situation. But remember, that insurance is always better than no insurance at all. It is also important to compare premium rates from different insurance providers before picking one that best suits your budget and needs.


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    Jacaranda Team
    Jacaranda Team

    Written by Jacaranda Team

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