One of the many decisions you’ll encounter when choosing a car insurance policy is whether you should insure your vehicle for an agreed value or for its market value.
What’s the difference between agreed and market value car insurance?
Market value: The standard option. Your car is insured for its current market value at any given time, including depreciation.
Agreed value: You and the insurer agree on a specific value ahead of time. Your car is considered to be worth this much for the purposes of the insurance policy.
The value you decide upon is the sum insured, which is the total amount of cover you have. This amount will affect when your car is written off, repaired or replaced under the terms of your insurance policy.
If you are involved in an accident and the cost of your repairs is more than the sum insured, your car will be written off and you can claim the total value of the sum insured to spend on a new car, or not, as desired. If you’re in an accident and the cost of repairs is less than the sum insured, your car insurance will cover the cost of the repairs.
How do they compare on price?
Agreed value policies typically cost more for two reasons:
The agreed value sum insured is typically higher than the market value sum insured. A larger sum insured comes at an additional cost.
Your agreed value will stay the same over time, while the market value will typically decrease. This tends to reduce the cost of market value policies over time, while agreed value policies will not get the same benefit.
In addition to this, agreed value policies are not always available from standard car insurance providers. Agreed value may be available as an extra option that carries additional costs.
The benefits and drawbacks of agreed value and market value cover
The pros and cons of market value
Pros:
It’s usually cheaper.
Your sum insured is automatically updated to the standard market value.
You avoid paying more than you need to.
It’s typically more convenient.
Cons:
Your vehicle’s market value might be less than you think.
A well-maintained car might be undervalued according to the market value.
In the event of a claim, your payout may be considerably lower than an agreed value policy.
The pros and cons of agreed value
Pros:
You know exactly how much you are insured for.
You agree a set value for your car (subject to insurer’s valuation requirement) so you have certainty.
You are able to cover the cost of modifications, aftermarket extras and other considerations.
You can choose your own level of cover to properly reflect the importance and value of your car.
Cons:
It typically costs more.
It requires some form of valuation.
Restrictions may apply to the age, value or type of car that can be insured at agreed value.
So which option is best for me?
The right policy for you depends on your situation and you should always consider the benefits and drawbacks of each policy in line with your own needs. However, if you’re having trouble deciding, try considering the following situations:
Do you own a rare, vintage, modified or classic car? You probably want agreed value, as it will be much more accurate in reflecting how much these kinds of vehicles are worth, including modifications and aftermarket extras.
Was your car expensive? If your car was a major investment, then agreed value is a good way of protecting it in the long run. With market value you may only be able to recover a fraction of the amount you paid in the event of a total loss.
Do you plan on getting a new car soon? Hopefully you won’t have to make a claim before then and you can save time and money by opting for market value.
Is saving money your top priority? If so, a cheap car insured at agreed value might be the right type of cover.
Do you need a car? Is your car absolutely essential for getting to work, or is it more of a convenience? If it’s a necessity, then agreed value means you know you’ll be able to afford a new one if your current car is written off. Market value may not provide you with enough of a claim payout for a suitable new car.
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*Based on data provided by Consumer Intelligence Ltd, www.consumerintelligence.com (April ’26). 51% of Confused.com car insurance customers could save £511.52.
Esther Wolffowitz was a publisher at finder.com specialising in insurance. Esther holds an MSc in Media and Communication Governance from the London School of Economics and Political Science (LSE).
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