Understanding Market Value vs Agreed Value Car Insurance
- Car Insurance,
- Aug 30, 2019
When it comes to buying or leasing a car, there are tons of questions that go through the mind. What make and model to buy? Which color? How much mileage? Used car or a new one? And most important of all, what type of insurance to opt for. Now all these questions are actually little decisions that are going to make your life easier or tougher in the long run regarding your car.
In order to reach the right decision and conclusion, it is important to be fully aware of the consequences of each choice. For that, a bit of researching goes a long way. The automobile industry jargon can be a bit confusing at times but this article will hopefully help in clearing some of your regarding the market value and agreed value.
As the name suggests market value means the insurance of the current financial value of your car including depreciation at any given time. The amount that you paid when buying your car may be different from the current value because of the usage and depreciation.
The market value of your car is determined by the insurer. The way it's calculated is to basically compare it with other similar models and make f another car. The insurer may use in automobile industry guide or some other publication. It is the most common insurance method in Australia.
Pro of Market Value Insurance:
The good part about choosing the market value method to ensure your car is that you get to pay lower premiums which means that you will have to pay a lower amount of insurance money. Between you and the insurer, the market value is likely to be less than any valuation of your car.
Another benefit of this type of insurance method is that it changes with time according to the wear and tear of your car. So if later on, you choose to change your car, you will be able to get something similar to that standard of your previous car and not less.
Cons of Market Value Insurance:
Even though choosing the market value insurance gets you lower premiums there is a certain ambiguity that comes with it in case your car gets stolen or totaled. If you have opted for comprehensive car insurance, it will cover up the charges but they may end up being less than what you originally paid for your vehicle. Since your car is being estimated at its current rivalry cars in the open market.
You may have kept your car in the best condition but it will be undervalued because of the similar cars worth in the open market. In case there arises a situation where you have to claim the insurance, the amount may be a lot less than the initially agreed value because of its worth decreasing over time in the open market.
As the name suggest the agreed value is the amount of insurance claim that you and your insurer agree upon. The current value of your car may be less but you hold it more valuable so you may insure it at a higher price. If the car is of old make and model, the amount is bargained by considering the industry guidelines.
Pros of Agreed Value:
Since agreed value is a predetermined amount between you and your insurance company, it gives you the satisfaction of knowing the exact amount you will be getting if your car gets damaged or stolen. It gives you more control over your asset’s monetary worth.
You also have the luxury of weighing your car at a higher price than the other cars of the same model and make because of better maintenance or maybe some extra gadgets that you may have installed.
Cons of Agreed Value:
The premium for agreed car insurance is higher. If you are insuring your car at a higher price than its worth, you may have to pay more in terms of premiums. If you insure it for less, your car will not be accurately covered in case of some mishap.
The agreed value car insurance is usually based upon annual renewals so it is possible that your insurer may reduce the agreed value every year which is less than the initial agreed value.
Market Value or Agreed Value: which is more suitable for your Car:
The important factor to consider when choosing between market value insurance or agreed value car insurance is the fact that one will provide you more money in case of replacement. Some other factors that come into play are:
1- If you own a vintage or classic car, whose worth based on its history has increased over time rather than decreasing.
2- How expensive your car is? If you gave a lot of money for it, agreed value car insurance may be a better option
3- How soon do you expect to change your car? If you are not the type of person to stick to one car for long, market value is a good option as it will fetch you good amount of money in the open market.
4- Are you looking for long term coverage or trying to save money? Because if you do not have extra bucks to throw around it's better to get your car insured for market value since you won’t have to pay high premiums for it.
The important part when choosing between market value or agreed car insurance is to consider all variables and factors which may impact your car in the long run.