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What does agreed value mean in car insurance?


What is Agreed Value motor insurance?


Agreed value car insurance is a type of motor insurance coverage where the policyholder agrees to a fixed value for their vehicle with the motor insurer. This is different from the more standard 'market value' motor insurance cover, which covers the car, to the current value, which can change over time. What is Agreed Value motor insurance?


Most people who look to find an agreed value motor insurance policy will do so because the vehicle is a rare model. In these cases, they can be hard to replace and hard to work out what a market value may be.


Many agreed value motor insurance products are taken out on classic cars.


For example, as there can be pretty rare, the current market value can be pretty subjective. If you consider an agreed value insurance policy, it is worth checking to see if your vehicle falls under any list of 'Classic Cars' or 'Specialist Cars'.


Sometimes to qualify, the vehicle must be over a certain age to be deemed a rare or classic car. The car also needs to be under a specific value. Otherwise, car insurance companies may deem it too much of a risk for an agreed value motor insurance policy.


Before agreeing on a value for your vehicle, the motor insurer may look to validate the car's current value. This task can be done by providing pictures, independent valuations, examples of similar vehicles for sale, video' walk arounds' and proof of servicing and maintenance.


Examples of Speciality Vehicles:


  • Classic cars from a particular era, e.g. American Muscle Car, Hillman Imp etc


  • A sports car, e.g. Lotus Elise, Lister Storm, TVR Sagaris etc


What is market value car insurance?


In terms of car insurance, market value car insurance is standard car insurance covering the current market value of motor vehicles as detailed in the likes of Glass' Guide and CAP. With most vehicles, their market value will decrease over time. This car insurance policy will pay out the car's current market value only, not perhaps what the car was worth when you bought it or what the value was when you take out the policy.


Is Agreed Value Car Insurance the same as Agreed Value Gap Insurance?


No, the two types of insurance cover are not the same. The Agreed Value car insurance fixes a set value with your motor insurer. This is the figure your motor insurer will settle for you if the vehicle is written off. Agreed Value Gap Insurance is a type of cover you take to add to a standard' market value' motor insurance. The Agreed Value Gap cover will bridge the difference between the motor insurers market value settlement and the original Agreed Value. Agreed Value Gap Insurance quote


The agreed value is based on the vehicle's market value on the day the Gap policy was bought. If the car is written off in a total loss claim, you will receive the full Agreed Value of your vehicle between the motor insurers settlement and the agreed value of the Gap policy.


The 'Gap' exists between the original Agreed Value of the vehicle on the day the Gap cover was purchased and the current market value when the total loss occurs. This is because most cars will lose value over time.


Do you need to buy an Agreed Value Gap policy if you have Agreed Value car insurance in place?


It is improbable you would be able or benefit from having both Agreed Value Insurance and an Agreed Value Gap Insurance too.


If you have agreed value motor insurance, then your value is fixed anyway. Gap Insurance only helps if your vehicle loses value and your motor insurer only covers the current market value.


Also, most Gap Insurance products have a maximum age and mileage limitation for a car to qualify. This may be a maximum of 8 years old and 80,000 miles on the day you seek Agreed Value Gap cover. As most eligible vehicles for agreed value car insurance are older or classic cars, they probably would not qualify for Agreed Value Gap either.


Where can you buy Agreed Value Motor Insurance?


Agreed Value Motor Insurance cover tends to be available from specialist insurance brokers. This is because the cover may be quite complex, and only a small number of insurers may provide such cover. Currently, only around 2% of the comprehensive motor insurance products in the market give an agreed value cover.


The benefits of Market Value Motor Insurance


Market value car insurance matches the replacement of your car. So you know you can replace the vehicle with something similar to your vehicle with the insurance covered. In reality, with vehicle depreciation, you may get much less money back. In this case, an additional Gap Insurance policy can be helpful, as most car values will get lower over the years.


Additional benefits will include the ease at which you can get cover. All kinds of motor insurers, comparison websites and high street insurance brokers will have access to a range of insurers who can offer market value motor insurance.


The benefits of Agreed Value Motor Insurance


The main benefit is that you can agree to a strict value for your vehicle, should it be written off during the policy term. This gives certainty for the value you are covered for should you have to claim in the event of a total loss. With a classic car, the value can be pretty subjective.


Agreed value or market value motor insuranceIf you were only on a market value insurance policy, then this could mean you are offered far less than you would expect to require to replace your vehicle.


Agreed Value motor insurance can be quite expensive, but guaranteeing the value may still be good value in that respect.


The downsides of Market Value Motor Insurance


The key downside is that in taking market value motor insurance cover, if the car loses value due to depreciation, as most will, then the potential settlement you could get will be lower. That said, and as stated above, a Gap Insurance policy could guard against that loss for you.


The downsides of Agreed Value Motor Insurance


The main downside of an agreed value insurance policy is the availability of the product. Only specialist brokers tend to be able to provide it. Usually, the types of vehicle you can get this type of insurance for is restricted also.


Finally, you may find that for your vehicle to qualify for agreed value cover, it has to be a second car, and also the annual mileage may be capped between 3,000 and 5,000. An insurer will unlikely provide an agreed value motor insurance for a vehicle being used every day and covering 20,000 miles a year.


In conclusion, the difference between market value insurance and agreed value car insurance is that the former value your vehicle based on what it would cost to replace in today's market. At the same time, the latter sets a predetermined value for your car.


When deciding which type of policy will work best with you, consider whether you want to have more control over how much money you pay or if you prefer not to worry about fluctuations in the automotive industry.


Have any of these considerations led you into buying an agreed-value motor insurance plan?