Tossing up the best type of car insurance can be 'tyre-some'. Compare & Connect covers the key differences between market value and agreed value to help you make informed choices.
Searching for car insurance can be a'tyre-some' job. From breaking down the jargon, to understanding prices, compare & connect has got you covered with this handy list of tips.
While there are many moving parts to car insurance, it's crucial to understand the differences between market value and agreed value.
When you insure your car at market value, it covers the vehicle for what it's worth under the current market conditions.
This process considers other models of cars that are in the same condition, and the estimated price of selling your car at that current point in time.
Insurers will calculate the market value based on a range of factors: the age of the car, its model, make, kilometres on the clock and its overall condition. Insurers tend to draw on industry best-practice to inform their decision-making.
For example, if you purchased a 2015 Honda Civic for $18,000, the current market value in 2022 may have reduced to $10,000. This is the amount that you'll expect to receive from your insurance provider.
In some cases, you may need to pay car insurance excess fees. However, those fees tend to vary based on agreements with your insurer.
Unlike market value, the agreed value involves shared decision-making between you and your insurer.
Together, you come to an agreement about what the car is worth. In instances where a vehicle holds a special place in your heart- maybe it was passed down, or it has a unique meaning to you-agreed value can price the car at a higher rate than market value.
For example, if you purchased a 2017 Ford Mustang for $70,000 today, you may place its value at $75,000 in five year's time. Of course, this needs to be a mutual decision between you and the insurer. However, insurers will pay this amount if you make a successful claim.
This may sound too good to be true, but agreed value isn’t an option for all vehicles. Insurance companies reserve the right to determine the rules around whether they make offer, and how much to insure the car for. Some vehicles with existing damage may not have access to agreed value.
What's The Best Policy For You?
There are a range of considerations that you should take into account when choosing the policy for you:
- The age and condition of your car
- What your car means for you
- How it affects your premiums
- The value of replacing your car
- Its service records.
Importantly, market value policies tend to be cheaper than the alternative. This could be a cost-effective solution if you don’t mind insuring the car for what the market is likely to pay for it.
Meanwhile, an agreed value policy pays the same amount irrespective of the car's depreciation in value.
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