#market value of cars
Car Insurance Market Value or Agreed Value what s the difference?
If you ve recently applied for an online car insurance quote, you ll probably know that auto insurance can be both complicated and confusing. And what about the actual process of obtaining a quote? Should you get a quote for agreed value, or market value? Here, we will attempt to answer that very question.
Market Value versus Agreed Value
Market value is a recognised industry term for what your car would fetch on the open market, as is. It is not, say, the trade-in value, nor what an unusual purchaser, such as a collector, would pay for your car.
Agreed value is a sum insured that has been fixed after agreement between the insurer and insured for the car.
If your car is written off or stolen, the difference in Market and Agreed value becomes all too apparent.
Let s look at some what if scenarios. Let s say you bought a two-year-old car for $30,000 (its new price was $50,000) and insured it for the agreed value of what you paid for the car.
If your car was stolen that year, your insurer would pay the $30,000 figure, as the period of new car replacement was over and that was the value agreed to before the claim.
If you insured the exact same car for market value under the same scenario, the insurer is likely to pay out a lot less than the purchase price of $30,000. The reason for this is that depreciation has kicked in and the $30,000 car is worth less as time goes on.
Think about car replacement cost
The question you need to think about is would this reduced amount be enough to replace your lost vehicle? Admittedly, you would have made a saving on your yearly premium but is it worth it?
If you drive a 10-year-old car, however, new replacement cost is not an issue and market value is entirely appropriate and so is the reduced premium cost.
Of course, this does not apply to vintage, classic or limited-edition cars which are insured through specialty companies.