How to choose between market value and agreed value

By Dan Hatch

4 minutes

28 November 2019

When you take out comprehensive car insurance, you’re given lots of choices. One of those is whether you’d like to insure your car for an agreed value or for the market value.

This decision becomes really important if you have an accident and your car is written off or very badly damaged – but it can be hard to know which option to choose.

This article will help explain the differences to you, so you can make an informed decision.

What is the difference between market value and agreed value?

Let’s start with some basic definitions.

  • Market value: refers to the value of your car on the open market. Market value takes into account depreciation, the condition of the vehicle, and the make and model. It’s the replacement value, like for like, of your vehicle at the time of collision. This value is updated often, and goes down as your car ages.
  • Agreed value: refers to a price you and your insurer have agreed is the value of your car. This value will be reviewed every time you renew your insurance. Like market value, agreed value will reduce each year as your car gets older.

How do agreed and market value policies work?

Let’s have a look at an example to see how agreed and market value policies work in practice.


You’ve bought a new car for $40,000, and you decide to insure the car for an agreed value (i.e. $40,000 - the amount that you paid for the car).

You then have an accident a few months later, and the car is written off. Under this agreed value policy, your insurer would pay you the agreed $40,000, less any deductions applicable.

If you had chosen to insure the same vehicle for market value, and the same accident occurred, you would likely receive a smaller payout. This is because the market value of a new car depreciates quickly.

With market value, your car is worth less each day from the time you purchased it. With agreed value, the value is only adjusted each time your insurance plan is renewed – and you have some control over how much that value is reduced.

An agreed value policy often carries a higher premium, but gives you more control.

So which is better: agreed or market value?

This depends on your individual needs and wants. It’s your choice with comprehensive car insurance. If your car is reasonably new and modern, then you may want to work with your insurer to decide on your car’s value and choose an agreed value policy. This will have an effect on your premium, which will be higher than for a market value policy.

Many people tend to choose a market value policy because it keeps their premiums down and because they know any payout in the event of a write-off will be in line with the actual market value of the car at the time. This can be a good option if your car is older.

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HBF Car Insurance is issued by Insurance Australia Limited ABN 11 000 016 722 AFSL 227681 (IAL), trading as CGU Insurance. For full policy details please refer to the Product Disclosure Statement (PDS) which can be obtained at [website]. This is general advice only and does not take into account your personal circumstances. You should consider the PDS and your personal circumstances in deciding whether to buy or hold these products. HBF Health Limited ABN 11 126 884 786 AR No. 406073 (HBF Health), is an authorised representative of IAL. Please read the Financial Services Guide (FSG) before applying for an HBF General Insurance product.

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