When buying insurance online, many insurers offer the choice between a “market value” or an “agreed value”.
For the “agreed value” option, you are asked to pick a value in a range.
My car is old but in perfect condition with very very low mileage. Similarly aged cars available for sale have at least double if not three times the mileage.
Is it reasonable to assume that the maximum value in this “agreed value” range will be the maximum amount the car insurer might pay out if I was to select the “market value” option? Given its low mileage and condition, if I was to select “market value” and my car was to be stolen, is there any possibility that I would get paid an amount greater than that maximum amount in the “agreed value” range?
Market value is normally the amount a car dealer would pay for your car, unless it is a low transaction collectible where one may be able to negotiate. Translation - wholesale value.
As for agreed value, that is the amount it is insured for. Not more.
No, usually policies will state the market value for the vehicle covered by the policy. This will be within the agreed value range. It won’t be the highest agreed value - this is why they have agreed values, so one can adjust the value of the vehicle slightly based on the insured vehicle in question.
No, the amount paid will be the market value less the excess for the policy.
For example, if the agreed value range was $7k-13k, one would expect the market value to be in the sub $10k to around $10k. The ~$10k market value is based on the average mileage and assumes vehicle good condition (no defects, damage or major modifications) of that make, model and age which a similar car can be bought wholesale (or possibly privately). If you insure as market value, the insurer will pay ~$10k less excess if the car is written off/stolen.
Agreed value allows a car owner to slightly adjust the value of the vehicle if the vehicle isn’t ‘average’. In your case slightly upwards to reflect low mileage. Insurers put a cap on the agreed value range to prevent fraud (someone insuring a car in attempt to make money).
It is also worth noting that the agreed value range varies between insurers. It is worth shopping around to see what is on offer and associated policy premiums.
I have seen quite a significant variation in the maximum “agreed value” between the 4 or 5 insurer websites I have looked at, from $14k through to $18k. Sometimes for the same premium!
I insured based on agreed value prior to the pandemic, paying a higher premium for this and thinking it was the wise choice. The car was stolen and written off recently and sadly its market value was higher than the agreed value. Couldn’t have predicted it. I also understand not all insurers determine the market value based on the red book value, so in the future I will be asking how market value is determined.
Used car values in the Covid world briefly defied the usual trend. It is not the norm. One can also opt for an agreed value that is less than market to keep the cost of insurance manageable.
Alternately a vehicle insured for an agreed value, stolen and written off might have on the day a market value less than the agreed value.
A car insurance policy for ‘market value’ is in part a bet between the insurer and insured over the future value of the vehicle. The odds favour the insurer.
You may discover some window dressing in that, but when it comes to a claim, excepting for speciality or collectable vehicles, ‘market value’ is what the ‘market’ would pay for a vehicle in similar condition. The norm is it is the wholesale amount a dealer would pay on the spot, the low end of the Redbook value is usually it. Arguing that it may have been low mileage, only driven on Sundays to church by a careful elderly driver, not a mark on it, and so on do not add value. The spot market considers it a commodity, not more. There are anecdotal reports some claims are paid a bit more when the policy holder can demonstrate the vehicle had a higher value such as documented private sales at a higher value, not just one or a handful, but enough to demonstrate a ‘market’.
Interesting because Youi Recently told me they didn’t look at Red Book value- but it seems this was a tad misleading as it sounds like it is a good indication as a rule of thumb, in terms of the market value generally being at the lower end of this.
It is possible Youi and Redbook use the same datasets, so it may be true they do not use Redbook, just coincidentally the amounts would be similar if not the same.
When I last traded a car I checked the Redbook numbers, and sure enough my pristine trade was valued within a few dollars of the Redbook low end. Whatever sources an insurer or dealer use, they are all based on the same underlying data from the Australian vehicle marketplace.
I also have found myself caught in this recently. After moving my house insurance to where my my car & caravan policies are to make it easier for myself I again mentioned that my car had a “ding” from a friend throwing a stone about the size of a 50cent piece. Prior they had me insured for agreed value being $5500 more than what they will now pay for by book value. My car is less than 3 years old and has 12500 kms on the clock. I had disclosed this before, so I wonder what would have happened had I have had a serious claim. I do intend on getting the “ding” fixed. I am always honest with insurance companies (as in life) but gosh it’s a lot less. Anyone got any ideas out there that may help me please? Until I can afford to get that done I am a little concerned about my beaut car! Thanks everyone!
About 2 years ago I had a quite deep dint just above the rear wheel and two smaller ones on the drivers door pulled by a paintless dent puller I think it cost about $180
Well my car would have been A-ok if it hadn’t been for that stupid friend throwing the stone, that’s probably where the whole problem lies looking back!
But yes wise words, thanks PhilT
