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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.
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.
Agreed value policies typically cost more for two reasons:
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 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:
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