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Car insurance: what’s the difference between market value and agreed value?


It doesn’t matter how long you’ve had a car for, navigating the world of insurance can sometimes be a bit tricky. You may find that when you’re shopping for insurance or even making a claim, you have a bunch of questions – including an all-too-common one, “what’s the difference between market value and agreed value?”

This is something that usually only becomes relevant if you’ve totalled your car or it’s been stolen and you need your insurer to give you a payout for it. Do they give you the amount that’s market value, or agreed value? Is that something you should set when you get an insurance quote, or worry about later? And what do they both even mean?

Read on to find out.

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What is market value?

As the term suggests, market value is the amount that your car would be sold for on the ‘open market’ (before the accident, of course). ‘Open market’ basically just means out there in the car selling/buying world, so it’s not the same as the trade-in value or what a specific buyer (like a collector, for example) would pay for it. It’s also not the same as how much your car was or is brand new – as your particular vehicle’s age, mileage, condition, etc. can determine how much it’s worth.

The market value is determined by the insurer, using an industry guide or publications. Insuring your car with a market value tends to mean you get a lower premium, meaning you’ll pay less for your insurance policy. It’s also the most common method for car insurers in Australia.

What is agreed value?

Agreed value, on the other hand, is an amount that’s been agreed on by you and your insurer, usually at the time of taking out or renewing your policy. It can be any amount within reason, as long as the insurance provider you’re using is happy with it.

Typically the premium you’d pay on this kind of car insurance policy is going to be higher than market value, and it can be harder to find an insurer who will cover you for an agreed value.

Will my insurer pay me the market value or agreed value?

If you’re already insured, or are shopping for a policy, you should be able to find out if your policy is/will be covered by a market value or agreed value sum pretty easily. Car insurance companies need to provide policy documents that outline this kind of information, plus, when you’re receiving your quote, you should be able to get an indication.

Since agreed value is less common, it’s more likely that you will be covered by the market value of your car.

Is market value or agreed value better?

Since everyone’s individual needs are very different, it’s basically impossible to say which one is resolutely ‘better’. As always, it’s important to think about the pros and cons of both and weigh up what’s going to work for you best.

You can either choose to insure your vehicle for its market value (if we agree) or the ‘amount covered’ which allows you to set the amount you want your car to be insured for. If you want to choose the amount your vehicle is covered for. We’ll ask you for details about your car and you, and then use that to give you a minimum and maximum number you can cover your car for. You can adjust the amount to any number in that range, and that will become the maximum amount we’ll pay you in an insured event. You can also choose market value rather than a specific amount, if we agree. This option may reduce your premium. Except for the terms of this optional cover, the cover provided by your policy otherwise remains the same. Note: If you select this optional cover, it cannot be removed from the policy during the period of insurance. Limit If this option is shown on your certificate of insurance, your amount covered is the market value of your car at the time of the incident.

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Insurance is issued by AAI Limited ABN 48 005 297 807 trading as AAMI Car Insurance. Please read the relevant Product Disclosure Statement before you make any decision regarding this product. The Target Market Determination is also available.