Imagine your car is written-off tomorrow. With agreed value cover you already know the cheque amount; with market value you wait for the assessor to decide what the car was worth that morning. One offers certainty, the other a lower premium. The right choice hinges on whether you value predictability, drive something special, or just want to keep costs down. Understanding the trade-offs now can save thousands and a mountain of stress when the unexpected happens.
This guide unpacks both options in plain English. Expect crystal-clear definitions, a side-by-side look at premiums and payouts, Australian examples, and a five-step decision tool. We’ll also cover accessories, finance gaps and switching mid-policy. By the end you’ll know which cover fits your budget and peace-of-mind test — and how to lock it in without paying a cent extra. Content is framed for Australian insurers, regulations and valuation data, so advice translates to your quote.
Understanding the Basics: How Insurers Put a Price on Your Car
Before comparing agreed value vs market value, it helps to know the jargon that appears in every Product Disclosure Statement (PDS). At claim time these terms decide how big (or small) the payout is, so let’s break them down first.
Sum insured, total loss and write-off explained
The sum insured is the ceiling the insurer will pay if your vehicle can’t be economically repaired. It comes into play when the car is judged a:
- Total loss – repair cost plus salvage exceeds the sum insured
- Write-off – legal or safety rules (think NSW’s Written-Off Vehicle Register) mean the car can’t go back on the road regardless of repair cost
If your Mazda 3 is insured for $18 000 and repair quotes hit $19 500, the assessor declares a total loss and the insurer writes you a cheque up to that $18 000 limit (minus any excess).
Total Loss Payout = Sum Insured – Excess – Outstanding Premium
Depreciation, kilometres and demand all pull that figure down over time, which is why the next two valuation methods matter.
Where agreed and market values fit in
Within comprehensive or Third Party, Fire & Theft cover, insurers can cap the sum insured in two ways:
- Agreed value – you and the insurer lock in a dollar amount at policy start. It shows on your schedule and usually stays fixed until renewal.
- Market value – the sum insured floats with the “reasonable retail price” of a similar car on the day of loss.
Some budget brands only offer market value to keep premiums lean, while specialist or prestige policies almost always offer both choices. Whichever route you pick, any factory or aftermarket accessories need to be declared up front or they may not be factored into the sum insured.
Australian industry terminology
Under ASIC’s RG 165 guidance, insurers must use plain language, but you’ll still see:
- RedBook or Glass’s – data services that feed current retail and wholesale values into claim assessments
- PAV (Pre-Accident Value) – market value immediately before the smash
- Enhancement factor – upward adjustment for low kilometres or dealer log-book history
- De-list deductions – reductions for rust, prior damage or missing keys
Knowing these phrases arms you to query any figure that seems off and, ultimately, to choose the valuation method that best protects your wheels and wallet.
Agreed Value Cover in Plain English
Agreed value cover is the “set-price” option. You and the insurer shake hands on a figure now, and that same dollar amount appears on the cheque if the car is written off tomorrow—no haggling with assessors, no scrolling classifieds to prove its worth. Because the number is locked in at policy inception, the onus is on you to pick a realistic yet protective amount. Here’s how the process works in practice.
Setting the agreed value at policy start
- You provide the insurer with make, model, build year, kilometres and any factory options.
- The insurer offers a range—often ±10 – 15 % of the current retail average from RedBook or Glass’s.
- You select a sum within that window. Going higher may be possible, but you’ll need evidence such as:
- Clear photos showing immaculate condition
- Receipts for recent upgrades (e.g. $4 000 sound system, performance exhaust)
- Independent valuation certificate for classics or collectables
Tip: Aim for the replacement cost, not the price you paid, especially if demand for your model has spiked.
What happens at renewal
Unlike market value, your agreed figure doesn’t automatically slide. Each renewal notice will show a revised amount—usually a small drop to mirror depreciation. Check that new number:
- Added a tow bar or bull bar? Ask for it to be included.
- Car shortage pushing used prices up? Re-negotiate upward before paying.
- Disagree with the insurer’s adjustment? Provide fresh photos or valuation documents.
Failing to review can leave you under-insured or paying premium for an inflated figure.
Pros of agreed value
| Benefit | Example scenario |
|---|---|
| Guaranteed payout | Classic Holden Monaro where parts scarcity inflates market price |
| Finance gap protection | New SUV with $48 k loan balance and only 10 % equity repaid |
| Covers pricey mods | Ute with $6 k suspension and canopy setup |
| Peace of mind | Busy parent who can’t face a drawn-out value dispute |
Additional upside: lenders and novated-lease providers often insist on a fixed sum so they’re not left short.
Cons of agreed value
- Premiums are typically 5 – 15 % higher because the insurer’s exposure is fixed and often above true market worth.
- Risk of over-insurance: if you lock in an optimistic figure and prices fall, you’re paying extra for a payout you’ll never receive (insurers won’t pay more than the agreed amount).
- Paperwork burden: classic, prestige and heavily modified vehicles may require paid written valuations every few years.
- Limited availability: some low-cost policies refuse agreed value on cars older than, say, 15 years.
Weigh these trade-offs against your budget and appetite for certainty before ticking the “agreed” box.
Market Value Cover and How It’s Calculated
Market value cover is the ‘floating-price’ alternative in the agreed value vs market value debate. Instead of a fixed number, the sum insured is whatever your car would realistically fetch from a willing buyer the moment before the incident. Because that figure rises and falls with the used-car market, your premium is usually cheaper, but the final payout isn’t known until claim day.
Definition and valuation sources
Insurers define market value as the “reasonable retail price” of a comparable vehicle in your postcode just before it was damaged, stolen or written off. To pin that down, they lean on multiple data feeds:
- RedBook or Glass’s dealer guides
- Recent auction hammer prices
- Classified listings for identical make, model, year and trim
- Wholesale offers from local dealers
Adjustments are then made for objective factors—age, odometer reading, service history, optional extras—and subjective ones such as overall condition and colour popularity. A low-k RAV4 Hybrid in Perth, for instance, may be valued higher than the same car with 120 000 km in Hobart simply because demand and freight costs differ.
How claims are assessed
- An assessor inspects the vehicle (or reviews photos if it’s been towed away).
- Pre-existing dents, hail pings or worn tyres are noted and can reduce the value.
- Salvage value—the amount a wrecker will pay for what’s left—is subtracted from the repair cost to decide if the car is a total loss.
- The insurer cross-checks the proposed payout with the valuation reports.
If you disagree, you can supply recent sales ads or an independent valuation, but be prepared for a back-and-forth that may delay settlement.
Pros of market value
- Lower premiums: generally 5–15 % cheaper because the insurer’s exposure moves with depreciation.
- Set-and-forget: no need to renegotiate the sum insured each renewal.
- Reflects real-time prices: handy when used-car values surge (as they did during COVID supply shortages).
- Simpler paperwork: no costly valuations or photo evidence required at the outset.
Cons of market value
- Payout uncertainty: you won’t know the cheque amount until the assessor finishes the maths.
- Potential disputes: disagreements over condition or comparable sales are common AFCA complaint topics.
- Modifications often discounted: aftermarket wheels, stereo gear or lift kits may add only a fraction of their purchase cost.
- Loan-gap risk: if your finance balance is higher than the assessed value, you’ll still owe the bank after the payout.
Choosing market value makes sense for everyday commuters and budget-minded drivers, but understand the trade-off: you swap premium savings for a variable settlement figure.
Key Differences: Premiums, Payouts and Stress Levels
Choosing between agreed value and market value isn’t just a line item on your quote—it shapes what you pay every year, what you receive after a total loss, and how many grey hairs you sprout during the claims dance. Below we line up the headline contrasts, then drill into cost, claim day and finance considerations.
Side-by-side comparison table
| Feature | Agreed Value Cover | Market Value Cover |
|---|---|---|
| Premium cost | Generally 5 – 15 % higher | Lower, tracks vehicle depreciation |
| Payout certainty | Fixed dollar amount printed on policy schedule | Calculated at claim time using current sales data |
| Accessories & mods | Full declared value usually included | Often discounted or capped |
| Dispute likelihood | Low—figure already agreed | Higher—valuation method open to challenge |
| Finance/lease friendliness | Favoured by lenders, reduces GAP risk | May leave shortfall if loan exceeds market price |
| Stress level | Peace-of-mind upfront | Potential wrangling with assessor |
Premium impact
Insurers load agreed value premiums because they lock in a sum that may exceed the future market. Expect a bump of roughly 5 – 15 %, though the exact margin swings with:
- Driver profile (age, claims history, licence class)
- Postcode risk (theft, hail, kangaroo strike frequency)
- Chosen excess (higher excess can offset the agreed-value loading)
Rule of thumb: if the agreed figure sits 20 % above today’s market, premium difference becomes more pronounced. Run both quotes and note the dollar delta, not just the percentage.
Claim-time impact
Numbers tell the story better than theory. Picture a two-year-old Mazda CX-5:
- Agreed value selected at policy start: $40 000
- Current RedBook retail mid-point: $31 000
Write-off occurs after a storm. With agreed cover you receive $40 000 – excess. Under market value you’re looking at about $31 000 – excess, a $9 000 gap. AFCA case data shows valuation disagreements feature in roughly one in every ten motor disputes—most centre on market-value policies where owners feel short-changed against dealership prices.
Finance & leasing angle
Cars often depreciate faster than loans amortise, especially with low-deposit finance. That sets up a GAP risk: owing more on the loan than the insurer pays out. Agreed value mitigates this by pegging the sum above the loan balance for the first couple of years. Some novated-lease providers insist on agreed value (or standalone GAP insurance) to protect their exposure. Market value can still work if you’re ahead on repayments or have GAP cover tucked in elsewhere, but crunch the numbers—being upside-down on finance after your car is wrecked is nobody’s idea of fun.
When Agreed Value Is the Clear Winner
Agreed value cover isn’t always about pampering an ego—it’s a practical tool for certain drivers and situations. Below are the scenarios where locking in a figure almost always beats rolling the dice on market swings.
New, prestige or classic vehicles
High-ticket models and sought-after classics often carry price tags the used-car guides can’t keep up with. Agreed value locks in the true replacement cost of your freshly delivered Tesla Model Y or lovingly restored ’71 Monaro, shielding you from abrupt valuation dips.
Heavily modified cars
Spent ten grand on lift kits, rims and a long-range tank? Market valuations rarely credit aftermarket gear at full price. Listing every upgrade under an agreed policy means those accessories are paid out in full, not at scrap-yard rates.
High loan balance situations
If your finance statement still shows a chunky principal, a write-off under market value can leave you owing the bank. Choosing agreed value that matches—or slightly exceeds—the loan balance prevents an unwanted “GAP” debt.
Low tolerance for uncertainty
Some owners just want to know the number, sleep better, and get on with life. An agreed figure eliminates haggling with assessors, perfect for time-poor parents or sole traders who can’t afford extended downtime.
When Market Value Makes More Sense
For many drivers a floating payout is not a drawback at all; in fact it can be the smarter, cheaper route in the agreed value vs market value decision.
Everyday run-abouts and older cars
If your 2012 Corolla has already shed most of its depreciation curve, paying extra for a locked-in figure is overkill. Market value naturally tracks the going price and still covers hail, theft and kangaroo encounters.
Budget-focused drivers
Lower premiums free up cash for servicing, tyres or simply keeping the rego current. For students and families living week-to-week, predictable monthly outgoings matter more than a theoretical top-tier payout.
Cars with steady resale values
Fleet favourites like the Hilux or i30 have transparent second-hand markets. Because price guides rarely diverge, the assessor’s figure will be close to what you’d pocket in a private sale anyway.
Short-term ownership plans
Planning to flip the car within a year? Paying an agreed-value loading you’ll never claim makes little sense. Let market value carry you through the interim and channel the savings toward your next deposit.
Your 5-Step Decision Framework
Still torn between agreed value and market value? Use the quick framework below to turn that uneasy feeling into a clear-cut answer. Grab a cuppa, your latest renewal notice and five spare minutes.
Step 1 – Check the current market range
Fire up RedBook, Carsales or even Facebook Marketplace and jot down the low, mid and high prices for your exact model, year, trim and kilometre bracket.
- Note any obvious premiums for colour or factory options.
- Average the mid-points to create a realistic “drive-away today” figure.
If that number shocks you, better to find out now than after a write-off.
Step 2 – Request both quotes
Most insurers (National Cover included) can issue parallel quotes in seconds. Ask for:
- Comprehensive cover at market value
- The same cover at your preferred agreed value
- Variations with a higher or lower excess
Record each premium and any special conditions (e.g. valuation certificate required).
Step 3 – Calculate the “certainty cost”
Work out how much you’re paying for peace of mind:
Certainty Cost = (Agreed Premium – Market Premium) ÷ (Agreed Payout – Likely Market Payout)
Example: If the premium difference is $120 and the potential payout gap is $8 000, the certainty cost is 1.5 %. Anything under 3 % is generally considered good value; over 5 % and you’re buying expensive reassurance.
Step 4 – Factor in finance, accessories and usage
Run a simple checklist:
- Loan balance vs potential market payout (avoid negative equity)
- Aftermarket mods and their replacement cost
- Commercial or rideshare use—some platforms insist on agreed value
- Annual mileage and parking location (affects both premium and valuation drift)
If two or more boxes lean towards certainty, agreed value likely wins.
Step 5 – Review annually
Set a calendar reminder one month before renewal. At each review:
- Re-price the car using Step 1’s sources
- Re-run the certainty cost formula
- Add or delete accessories from the policy
- Re-quote with National Cover’s price-beat guarantee to make sure you’re not overpaying
Values, premiums and personal circumstances shift every year; the best policy today is not automatically the best policy next August. A quick tune-up keeps your agreed value vs market value choice aligned with reality—and your bank balance.
Frequently Asked Questions
Below are short, punchy answers to the queries we hear most when customers weigh agreed value vs market value cover. They’re general pointers only—always check the exact wording in your Product Disclosure Statement.
What is the difference between market value and agreed value?
Market value is the “reasonable retail price” of a like-for-like car on the day it’s written off. Agreed value is a fixed dollar amount you and the insurer lock in at policy start. Think of market value as a floating number that changes with the used-car market, while agreed value is a pre-printed figure on your schedule. For detailed definitions see the earlier “Understanding the Basics” section.
Is agreed value insurance more expensive?
Yes—most insurers load the premium by 5–15 % because they’re guaranteeing a payout that might sit above future market prices. The older or more volatile the car’s value, the bigger the loading tends to be. You can soften the hit by opting for a higher excess or bundling policies, but the gap rarely disappears completely.
Can I insure my car for more than its market value?
Often, but you’ll need proof. Insurers will usually let you nominate a higher agreed value if you can justify it with:
- A recent independent valuation
- Receipts for expensive aftermarket accessories
- Evidence of collector status (e.g. classic-car club letter)
Without documentation, most underwriters cap the agreed figure at about 10–15 % above the current retail average.
Can I switch from agreed to market value mid-policy?
Generally yes. Call your insurer, confirm any admin fee, and they’ll issue a pro-rata refund or charge depending on the premium difference. The new valuation basis starts from the date of the endorsement, not back-dated to policy inception.
What happens if agreed value is lower than market value at claim time?
The insurer is only obliged to pay the agreed figure shown on your schedule, even if the car’s market price has climbed. This is why it’s crucial to review the sum insured at every renewal—and renegotiate upward if shortages or demand have pushed prices north.
Final takeaways
Agreed value brings certainty: you know the exact cheque you’ll get, lenders stay happy and your costly accessories are covered to the dollar. The catch is a higher premium and the homework of checking that sum every renewal.
Market value keeps the annual cost down and automatically follows real-world prices, but the payout will only be settled after an assessor crunches the numbers. That can leave a finance gap or a bruising dispute if you think the figure is too low.
There’s no one-size-fits-all answer. Match the cover to your car’s age, loan balance, modification spend and—most importantly—your risk tolerance. Spend five minutes with the decision framework above and you’ll know which box to tick next time the renewal lands.
Ready for quotes that beat the rest and spell out both options in plain English? Compare policies with National Cover’s price-beat guarantee and stress-free claims support today at National Cover.
