Difference between agreed value and market value

When researching comprehensive car insurance options for your car, you may have come across the terms “agreed value” and “market value”. If these terms have you scratching your head a bit, we’ve got you sorted.

Agreed value

Agreed value car insurance refers to the amount that you and your insurance provider agree to insure your car for during the period of insurance shown on your Certificate of Insurance. This amount is the agreed value of the car and will be reviewed each time your insurance is renewed, rather than staying as a static amount. With an agreed value policy, you will always be aware of the amount you would be paid in the event of your car being stolen or written off. the amount that you and your insurance provider agree to insure your car for during the period of insurance shown on your Certificate of Insurance. This amount is the agreed value of the car and will be reviewed each time your insurance is renewed, rather than staying as a static amount. With an agreed value policy, you will always be aware of the amount you would be paid in the event of your car being stolen or written off.

Market value

The market value is the value of your car in your local area immediately before the incident. To determine this value, Australia Post, may use recognised industry guides and consider things like the make, model, age, kilometres travelled, both factory-fitted and legal after-market modifications and accessories, and the general condition of your car.

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Examples of agreed and market value policies

Here are a couple of examples of how your policy may work

Agreed value example

Warren has an agreed value policy with an excess of $900. His 5-year-old car is currently financed. Warren was not at fault in the accident and was able to provide the other driver’s details. Warren’s car was not safe to drive and required towing.

In this example, we pay the $750 towing cost for Warren’s car as it is not safe to drive, and the $27,000 agreed value of his car as it was assessed as a total loss.

As the car was still financed at the time, we paid $2,000 to the finance company (the amount owing on Warren’s car loan), and paid Warren $25,000 (the agreed value of his car less the amount owing). As Warren was not at fault he did not have to pay an excess. In this case, the total paid out by us would be $27,750.

Market value example

Julie has a market value policy with a basic excess of $700. She pays for the premium in monthly instalments. Julie parks her 5-year-old car to catch a train to work and when she returns in the afternoon the car is gone.

She calls the police and then contacts us. The car was not found within 14 days of being reported to the police.

In this example, Julie’s car does not meet the policy’s conditions for a new car replacement. We pay $45,400 as that’s the market value of the same make and model and $910 for the hire car. Julie would pay the excess of $700 plus her remaining premium instalments totalling $240. This brings the total paid out by us to $45,370.

Should I insure my car for market value or agreed value?

The choice of market value or agreed value car insurance is entirely a personal decision. Before deciding, you should assess your individual situation and needs. If you would like some extra assistance, consider talking with your trusted insurance provider to discuss your options.

Agreed value policies can have higher premiums than market value policies, which depends on how different the agreed value is from the market value. Some people tend to prefer market value policies as the price of a payout if your car is stolen or written off will be approximate with the market price. People with financed cars may prefer an agreed value policy as they will know the exact amount that will be given in the event of the car being written off or stolen, as long as the circumstances are covered under their policy. Agreed value policies can have higher premiums than market value policies, which depends on how different the agreed value is from the market value. Some people tend to prefer market value policies as the price of a payout if your car is stolen or written off will be approximate with the market price. People with financed cars may prefer an agreed value policy as they will know the exact amount that will be given in the event of the car being written off or stolen, as long as the circumstances are covered under their policy.

Australia Post offers Comprehensive Car Insurance options to suit a range of different needs. Our team aims to make the insurance process simple by providing information and choice, allowing you to select cover that suits your individual situation and requirements.

Australia Post home and motor insurance is issued and underwritten by QBE Insurance (Australia) Limited (ABN 78 003 191 035, AFSL 239545) (QBE). Australian Postal Corporation (ABN 28 864 970 579, AR No: 338646) is an authorised representative of Australia Post Services Pty Limited (ABN 67 002 599 340, AFSL 457551) which is acting (under its own AFSL) on behalf of QBE. Any advice provided is general only and has been prepared without taking into account your objectives, financial situation or needs and may not be right for you. To decide if this product is right for you, please read the relevant Combined Financial Services Guide and Product Disclosure Statement. Any reference to value and competitiveness refers to an average market segment and may not include your specific circumstances.