Understanding the Difference between Market And Agreed Value Car Insurance

For some car owners, the first time they hear the terms market value and agreed value car insurance is when purchasing an insurance policy. Not fully understanding what each option means and what they offer, they might make a less than optimal choice. So here are a few facts about both insurance policies.

What Is Market Value Car Insurance?

This is an insurance policy that takes into account the current market value of the car at any given time. It means, in the event of a total loss, the insurance agency would pay to the insured an amount equal to what his car was worth on the market right before the loss.

What Is Agreed Value Car Insurance?

As the term implies, this sort of insurance is like an agreement between the insurer and the insured on the cars’ worth. Thus, when there is a total loss, the insured would get the full amount that has priorly been agreed upon.

The Pros and Cons

Market Value Car Insurance

Pros

*It’s cheaper

*There’s no fear that you are paying excessively

*Your premiums are automatically updated as market value changes. This makes it convenient

Cons

*The payout on a claim could be far lower than that of an agreed value coverage

*The market value of your vehicle at the time of a loss may be far below your expectations

*Even with optimal maintenance, your car might still be undervalued on the market

Agreed Value Car Insurance

Pros

*In the event of a total loss, you know exactly what you are getting

*You can insure your car for less than its market value. This helps you save money.

*If it wasn’t a total loss, there will be enough to cover for any damages that the car would have suffered.

Cons

*Depending on how high you go, the premiums on this policy are costly.

*Not every car qualifies for this type of policy.

*It requires some sort of valuation.

Which Policy Is Best for You?

Having considered what agreed and market value car insurance means and their differences, you might know which one is best for you. If you are still a little confused though, consider these:

The cost of buying the car: if your car was very expensive when you bought it then you should spring for an agreed value policy. Chances are that the current fair market value would not be so fair on the car because of depreciation and other factors.

If your car is also a custom-built car or a classic car, then an agreed value insurance policy is the best bet. For such cars, the usual market value insurance does not provide enough coverage. In the event of a loss, you might find that what the insurer pays you isn’t even up to half of the damages you incur.

Market value insurance on the other hand comes in handy if you need to save money on insurance. Agreed value could also work for this as you can insure your car for an amount lesser than the market value.

If you are also looking to get a new car soon, then the market value option is probably best for you.

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