Disclaimer: This information is general in nature only. While Budget Direct has endeavoured to ensure the information we’ve relied on is accurate and current, we do not guarantee it. Budget Direct accepts no liability for this information.

The next time you renew or request a quote for a car insurance policy, you may have the option between insuring your car for market value or an agreed value.

But what does this mean, and is there any benefit in having one over the other?

In this article, we’ll break down the pros and cons between the two, so that you can decide on which cover is going to work best for you.

Agreed value vs. market value

Market value or agreed value is the amount your car is insured for and is used to determine how much you receive should it be written off or stolen and not recovered.

Market value

When you insure your car for market value, you are covered for the reasonable replacement cost based on what your car’s worth ‘in the market’.

This is determined by your insurer, at the time of the loss or damage, taking into account factors such as the make, model, age, kilometres travelled, and overall condition.

One of the main benefits of insuring your car for market value is that premiums are generally cheaper than if you insure your car for an agreed value.

This is because the market value of your car normally depreciates over time, so the cost to reasonably replace it will be based on an insurer’s estimate of what your car is worth on the open market before it was damaged. In most cases, this is going to be lower than what the market value of your car was when you first took out or renewed your policy.

Agreed value

On the flip side, insuring your car for an agreed value means exactly that — you’ll be covered for an amount that your insurer agrees to insure your car for, regardless of your car’s depreciation during the policy term, which means should your car be written off or stolen and not recovered, you’ll know exactly how much money you’ll receive.

Naturally, insurance premiums for agreed value policies tend to be higher, because the agreed value — and thus the settlement you would receive — may be higher than if your car was insured for a market value. This is because the agreed value is set at the start of the policy term and you will receive this amount in the event of a total loss, even if the value of your car has depreciated.

At Budget Direct, you may have the option to insure your car for an agreed, provided:

  • your car is less than 10 years old; and
  • your car has not been converted to LPG (liquid petroleum gas); and
  • the car has no pre-existing damage; and
  • the agreed value is within an acceptable range of the market value.

View and update your Budget Direct policy details quickly and easily online, via Policy Manager.

Which is better — the market value or agreed value car insurance?

Ultimately, there isn’t a right or wrong answer when it comes to deciding between market value or agreed value car insurance, and it really depends on a few factors: how you value your car in relation to the market, how much you want to spend on premiums and the age of your car.

Insuring your car for its market value will likely be cheaper in terms of the premium you pay, but the market value of your car at the time of the loss or damage would generally be less than what you paid for it initially.

However, if your car is reasonably modern, or has factory/dealer options and/or non-standard accessories fitted and you would like to have it insured to replace it for a specified value in the event of a total loss claim, then an agreed value policy may be better suited, in which case your premium will usually be more expensive.

Get the right car insurance for your car

While Budget Direct can help, it’s ultimately up to you to choose an option that suits you and your circumstances. Start by weighing up each of the benefits and downsides listed and consider their impact when it comes to purchasing car insurance.

Budget Direct’s Car Insurance provides outstanding value to our customers with an additional 15%^ off on your first year’s premium when you purchase a new policy online.