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Agreed value car insurance fixes a specific payout amount at the start of your policy — so you know exactly what you'll receive if your car is written off. Market value insurance pays what your car is worth at the time of the claim, which is lower because vehicles depreciate over time.
Agreed value is generally preferable if you want certainty about your payout, particularly for newer vehicles, modified cars, or vehicles that hold their value well. Market value can be appropriate for older vehicles where the agreed value would be low anyway, and where a lower premium matters more than the certainty of payout. Always confirm the agreed value is realistic — an inflated agreed value may not be accepted by the insurer.
At the time of a total loss claim, the insurer assesses your vehicle's market value using industry guides (such as Glass's Guide or Red Book), comparable listings in your area, the car's age, condition, and kilometres. This figure can be lower than you expect, particularly if the used car market has softened since you took out the policy. This is why agreed value is popular for vehicles that matter financially.
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