Which is right for you?
First let’s look at what each of these terms means.
Agreed value is the amount you and your insurance company agreed upon at the creation of your insurance policy. This is the amount you would receive in the event of total loss. It does cost a bit more to have an agreed value so your premiums may be a little higher BUT it does come with that security of knowing how much would be paid out if anything devastating were to happen.
Points to remember:
- Agreed value is just that, it is AGREED upon with the insurance company so it needs to be a reasonable amount.
- This amount is usually re-assessed every year and adjusted to include depreciation.
Replacement value is similar to agreed value with a major difference. Replacement value means that at the time of an insurance settlement, the claim pay-out is the current cost to replace an item with one that is of the same like, kind, and quality.
Market value is insuring an item for what it is currently worth on the market today. The market value is what you will be paid out to replace that item in the event of total loss. Your premiums will be lower with market value and most insurance companies will give you a fair valuation when it comes to being paid out.
Points to remember:
- The amount you initially insured your item for will decrease due to depreciation and wear and tear.
- In most cases with market value you will be paid out the same amount you purchased the item for, it will be less due to depreciation and wear and tear.
- This is a good choice if you have an older car as vehicles depreciate in value as they age.
So, which is right for your situation?
Have you purchased a new car?
- Agreed value or replacement value would be good options. Depreciation on new cars is much higher than for older cars which means that in the event of total loss, replacement value would mean that your car would be replaced. Or with agreed value, you would be paid out enough to replace it.
Do you have a loan for your car?
- We would suggest agreed value in this circumstance. If you have your accident early on in your loan agreement and your car is written off, the market value of your car might not be adequate leaving you out of pocket. Agreed value gives you the security of knowing you will have enough to cover everything.
Have you purchased a boat?
We tend to go with agreed value on this one simply because with replacement value, the item is replaced with one that is of the same like, kind, and quality and this may not be to your liking. With agreed value, you get paid out the agreed amount so you get to make all the decisions.
Have you got a good second-hand car with no modifications?
Market value would tick all the boxes here. Cars depreciate with age and with market value you will pay lower premiums and have the benefit of receiving a fair pay out in the event of total loss.
Have you got a second-hand vehicle with lots of modifications?
We would strongly recommend an agreed value in this situation. In the event of total loss, the market value of your vehicle may not be high enough to replace all your modifications. With an agreed value, you know that all your hard work will be covered.
Wondering what you are currently covered for? Give us a call or an email and we will be happy to help.