01 August 2024
Agreed value car insurance: all you need to know
6 minutes
Agreed value car insurance isn’t super common, but for those with special vehicles it can be a great option. While it might be more expensive, it provides extra security in the case of a claim. So it’s definitely worth considering whether it’s the right choice for you, and how to find a good agreed value policy.
Let’s dive in…
What is agreed value car insurance?
Put simply, agreed value is a type of car insurance where you and the insurer agree on the value of your vehicle together. If your car is then written off or stolen, you can claim this pre-agreed pay-out for a total loss.
Agreed value is typically associated with coverage for classic cars, but it can be suitable for a whole range of other cars including:
- High performance
- Collector
- Modified or refurbished
- Kit
- Vintage or heritage
- Modern or future classic
- Imported
- Limited production
Difference between agreed value vs stated value vs market value
With so many types of insurance out there, it can get quite confusing! Agreed value car insurance is different from both stated value insurance and market value insurance. So, let’s break it down:
- Agreed value – as explained above, this is where you work with your insurer to set the value of your vehicle. This is also known as the guaranteed value, because it’s the maximum amount you’re certain to receive in the event of a claim.
- Stated value – this is where you set the value of your vehicle, or at least how much you’d be willing to receive should you need to make a claim. You might choose to set this value lower to reduce your monthly premiums. When it comes to paying out, your insurer chooses between the stated value and the market value, whichever is lower. It’s often a good option for modified commercial vehicles, for example.
- Market value – this is how much your vehicle would have fetched on the market at the time of your claim. It’s also known as the actual cash value and considers factors like model, mileage, and condition.
Why choose agreed value insurance for your vehicle?
Not sure if agreed value is for you? Well, we’re here to help you weigh things up.
Generally speaking, agreed value insurance makes sense if your vehicle is unusual, if it’s more valuable than others of its kind, or if it’s likely to gain in value over time.
Say you have an older car that you’ve dedicated time and money into refurbishing and keeping in mint condition. Perhaps you have a limited-edition vehicle with only a few others of its kind out there. Or maybe your car was previously owned by a celebrity. These are all examples of when agreed value might be the route for you.
Let’s take a look at the various upsides to consider.
Benefits of agreed value coverage
- Certainty – because your insurer pre-agrees to the value, you can be sure you’ll receive that amount for a total loss, no matter which way the market trends.
- Fairness – if your vehicle is your pride and joy, you’ll want to be sure you receive fair compensation for it. Unlike market value, agreed value uses a wide range of factors relating to you, your vehicle, and its condition to help determine its true value.
- Added protection – most cars depreciate over time due to age, mileage, and wear and tear. Agreeing a value in advance of any claim protects you against this.
Is agreed value worth it?
While prices vary between insurers, agreed value tends to be more expensive than standard car insurance. So, you may want to consider whether the unique value of your vehicle justifies the higher premiums. Also bear in mind that you might need to pay for an independent valuation of your car, which can add to your total costs.
On the flipside, classic cars can sometimes be cheaper to insure. They tend to be better maintained, and insurers may consider them less likely to result in a claim.
As is often the case, it’s about weighing up the pros and cons to decide what’s best for your personal situation.
How is agreed value insurance determined?
Agreed value can be a great option for motorists who want their insurance to reflect the true value of their vehicle. But how exactly is that amount determined?
Role of vehicle appraisals and inspections
Often, you’ll be asked to provide an independent valuation of your vehicle. Various companies provide this as a professional service, and some motorist clubs also offer valuations. However, some specialty insurers have their own set amounts for specific vehicles. This means you may not need to provide a valuation in some instances.
Once your vehicle has been appraised, you’ll receive a valuation certificate which you can send to the insurer as evidence. It’s a bit frustrating, but these certificates often can’t be transferred. This means you’ll need to get your vehicle valued again if you decide to change insurer.
Keep in mind that the insurance company may do its own assessment or counter with a lower price. It could take some negotiation to land on an amount you’re both happy with.
Factors considered in insurance costs
Alongside the value of your vehicle, insurers will consider other factors to determine the cost of your policy. This will vary, but some common ones include:
- Mileage
- Where you keep your vehicle
- Usage
- Driving habits such as no claims history and experience.
Some insurance companies may have a cap on annual mileage or provide a discount for fewer miles. Premiums also tend to be lower if the vehicle is kept in a secure space like a private garage, rather than being parked in a public area. And insurers may also charge less depending on how the vehicle is used, for example if you take it on leisurely drives rather than your daily commute.
The application process for agreed value insurance
So, you think agreed value insurance is for you, but how do you go about securing a policy? Let’s go through what’s often involved.
Required documents and information
You’ll be asked to provide various bits of evidence to support your application. Again, this will depend on the insurer but could include:
- Make and model
- Information about the current condition
- MOT and service history
- Record of ownership (e.g. if the previous owner was famous)
- Receipts (e.g. for modifications, refurbishments, or repairs)
- Photographs of both the inside and outside
- Valuation certificate.
Once you’ve submitted your evidence, you’ll work with the insurer to reach an agreed value, at which point you can set up your policy.
Because agreed value insurance can be quite hard to come by, many motorists will use an insurance broker – like us! Brokers can compare a range of insurers and policies on your behalf to make the whole process much smoother.
Common pitfalls with agreed value insurance, and how to avoid them
Given you’re likely to be paying extra for agreed value cover, it’s important you’re getting the best value for money. Thankfully, there are measures you can take to get the best bang for your buck.
Underinsurance risks
Unlike more standard cars, unique vehicles often appreciate over time. But if you have to make a claim, your payout will only go up to the maximum pre-agreed amount, even if this no longer reflects the true value of your vehicle. This could mean you’re underinsured.
On the flipside, if your vehicle depreciates, you could end up being overinsured and paying higher premiums than necessary.
That’s why it’s recommended to regularly renegotiate the agreed value – most likely when your policy is up for renewal, which is usually once a year.
Higher than necessary premiums
By its nature, agreed value does tend to come with higher premiums than standard car insurance. But there are steps you can take to ensure you’re not paying unnecessarily high prices.
Think about the factors insurers consider for policy costs and how you can address these. For example, you could keep an eye on your mileage, or find a more secure solution for where you store your vehicle. As with any insurance policy, aim for a good no claims history, and keep in mind that premiums will likely decrease for more experienced drivers.
Some insurers will agree to discounts if you’re part of a motorist club or forum. Be sure to ask about this when discussing your policy, or consider joining a club or forum if you’re not already a member.
Dealing with insurers
Agreed value insurance is quite niche. In fact, GoCompare found that just 3% of comprehensive policies on Defaqto offered it as standard. This can make it tricky to find an insurer, let alone compare quotes for best value. Prices can also vary substantially between different companies.
Here at Howden, we offer tailored, personalised support to help you compare policies and find the best option for you. Check out our services for classic cars, high performance cars, and luxury high performance cars.