Agreed value vs market value car insurance: what you get paid in a write-off

With agreed value cover, you and the insurer fix the amount the car is insured for at the start of each policy period, and that is what you are paid if the car is written off or stolen and not recovered (less any excess and unpaid premium, and subject to the policy terms). With market value cover, the insurer pays what the car would have sold for just before the loss, which it assesses at the time of the claim. Agreed value gives certainty; market value can be cheaper but the payout is decided after the event. Either way, the value only matters in a total loss: for repairable damage, the insurer pays the repair cost.

This guide sits in the car insurance overview. For choosing the level of cover first, see fire and theft vs comprehensive.

How each option works

Feature	Agreed value	Market value
When the value is set	At the start of each policy period, shown in your schedule	At the time of the claim
How it is set	Insurer offers a figure or range; you may be able to choose within it	Insurer's assessment of what a similar car would sell for, based on market data
Change during the year	Fixed for the period (it does not fall month by month)	Reflects the car's value on the day of the loss
Typical premium effect	Often a little higher, especially at the top of the range	Often a little lower
Main risk	You set it too low and are underinsured, or too high and pay extra premium for nothing	The assessed value is lower than you expected
Disputes	Rare about value, because it is in writing	Common, because value is judged after the event

Whether the market value includes on-road costs such as rego and dealer delivery, and how it treats accessories and modifications, depends on the policy wording. Read the PDS definition.

Worked example: a write-off (illustrative)

Nadia's car was bought for $31,000 two years ago. At renewal, the insurer offers an agreed value range of $22,000 to $27,000. She can also choose market value.

Option 1: agreed value at $22,000 (bottom of range), premium $1,140.

Option 2: agreed value at $26,000, premium $1,210.

Option 3: market value, premium $1,105.

Seven months later the car is written off in a crash. The insurer assesses the market value at $23,500 on that day. Her basic excess is $800.

Option	Payout before excess	Payout after excess	Premium paid that year
Agreed $22,000	$22,000	$21,200	$1,140
Agreed $26,000	$26,000	$25,200	$1,210
Market value	$23,500	$22,700	$1,105

The higher agreed value cost $70 more in premium than the lower one and returned $4,000 more. The market value option paid $1,500 more than the low agreed value, because Nadia had set the agreed value below the real market value. Setting agreed value low to save premium is a false economy if a write-off happens.

Many policies deduct the excess from a total loss payout; some waive it or have different rules for not-at-fault claims. Check the PDS.

The finance gap

If the car is on finance, the payout usually goes to the lender first. If the loan balance is higher than the payout, you still owe the difference.

Illustration: loan balance $27,800, market value payout $22,700 after excess. Remaining debt: $27,800 - $22,700 = $5,100, owed with no car. A higher agreed value, if the insurer offers one that reflects the car's true value, can reduce this gap, but it cannot be set above what the insurer will agree to.

New car replacement and other benefits

Many comprehensive policies offer to replace a car with a new one of the same make and model if it is written off within a set period from first registration, often the first two years, and under conditions such as kilometre limits and the car being bought new. Others offer this as an option. The value basis and these benefits interact: check which applies first in a total loss.

How to choose at each renewal

Check the agreed value against today's market. Look at prices for similar cars with similar kilometres in your state. If the agreed value is well below, raise it; if well above, the insurer may not accept it anyway.
Ask what the value includes. On-road costs, accessories, aftermarket wheels, roof racks and tow bars may be included, listed separately or excluded.
Compare the premium difference between the bottom and top of the range. If it is small, the higher value often makes sense.
For classic or modified cars, agreed value is usually essential, and a specialist insurer may be appropriate.
Record the value you chose; it should appear in your certificate of insurance.

Common mistakes

Choosing the lowest agreed value in the range because it was the default, then being underinsured after a theft.
Assuming market value means the price paid for the car.
Forgetting to update agreed value after adding expensive accessories.
Not realising that the agreed value at renewal may drop as the car ages, even if you do nothing.

Frequently asked questions

Can I dispute a market value assessment?

Yes. Ask the insurer how it calculated the value and provide evidence, such as advertised prices for comparable cars. If you remain unhappy, complain through its internal process and then to AFCA. See disputing a refused claim.

Does agreed value mean I get paid that amount for any damage?

No. For repairable damage the insurer pays to repair the car. The agreed value is the maximum, and the amount paid in a total loss.

Will my agreed value go down every year?

Usually the insurer offers a lower range at renewal as the car ages. You can usually choose within the range offered.

Is market value the same as a valuation guide price?

Not necessarily. Insurers use their own methods and data. Ask what sources were used.

Sources

Moneysmart — agreed and market value explained
Australian Financial Complaints Authority — total loss and valuation disputes
ASIC — PDS requirements
Insurance Council of Australia — General Insurance Code of Practice information