Market Value vs. Agreed Value. Don't Let Your Insurer Lowball You After a Crash

Market Value vs. Agreed Value.

You bought a used car for $30,000. You insured it. Eight months later, it gets written off in an accident. You expect a check for $30,000 to replace it.

Instead, the insurance company offers you $24,000.

You are shocked. "Where did the other $6,000 go?"

The answer lies in one small checkbox on your policy: Market Value vs. Agreed Value. Making the wrong choice here can leave you with a massive debt, especially if you have a car loan in today's high-interest market.

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1. What is "Market Value"? (The Default Option)

Most insurers default to Market Value because it makes the premium cheaper and lowers their risk.

This means the insurer decides what your car is worth at the moment of the accident, based on current sales data, odometer reading, and condition. Since cars depreciate rapidly, this number is almost always lower than what you originally paid.

• Pros: Lower annual premium. Good for older cars where value is stable.
• Cons: You don't know the payout amount until after the crash. It is usually disappointing and non-negotiable.

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2. What is "Agreed Value"? (The Safe Option)

Agreed Value means you and the insurer agree on a fixed sum at the start of the policy year.

If you agree on $30,000, and your car is stolen or totaled 11 months later, they pay you exactly $30,000. No arguments, no depreciation calculations.

• Pros: Guaranteed payout. Protects you from market depreciation.
• Cons: Slightly higher premium (usually approx. $50-$150 more per year depending on the vehicle).

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3. The "Car Loan" Trap

This is where Market Value becomes dangerous. If you financed your car, you owe the bank a fixed amount regardless of what the car is worth.

⚠️ The Negative Equity Nightmare

• Loan Balance: You still owe the bank $28,000.
• Market Value Payout: The insurer pays you $24,000 based on current market rates.
• Result: You have no car, and you still owe the bank a $4,000 gap out of your own pocket.

If you had chosen Agreed Value for $28,000+, you would be debt-free.

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4. Which One Should You Choose?

Choose Agreed Value If:

• You have a car loan. (Critical! Ensure the value covers your loan payout figure).
• Your car is less than 5 years old but outside the "New Car Replacement" window.
• You have modified your car (mags, bull bars, suspension) and need those specific costs covered.

Choose Market Value If:

• You drive an old "beater" car where the difference in payout is negligible.
• You own the car outright (no loan) and have savings to upgrade if it crashes.

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The 5-Minute Check That Saves Thousands

When renewing your Rego and CTP, don't just blindly pay your Comprehensive Insurance renewal. Check the policy certificate. If it says "Market Value," call them and ask: "How much extra for Agreed Value?"

Paying an extra $5-$10 a month now could save you $5,000 of financial heartbreak later.

Disclaimer: This article is for general information purposes only and does not constitute financial advice. Policy terms, conditions, and exclusions vary between insurers. Always read the Product Disclosure Statement (PDS) before making any decisions regarding your insurance.