When taking out comprehensive car insurance, one of the key decisions you'll need to make is how your vehicle is valued. Most insurers offer two options: market value and agreed value. The choice you make at the time of taking out your policy determines how much you'll be paid if your car is written off or stolen.
It's a decision that's easy to overlook when comparing premiums, but it can make a significant difference to your payout if you ever need to make a claim. Here's what each option means, how they compare and what to consider before choosing between them.
Market value vs agreed value: key differences at a glance
| Market value | Agreed value | |
|---|---|---|
| Payout basis | Insurer determines value at time of claim and pays out based on that valuation | Fixed sum agreed at policy inception, which doesn’t change unless the policy is renewed |
| Premium cost | Generally lower | Generally higher |
| Payout certainty | Variable, as it may be less than expected if the car has depreciated | Certain, as the agreed sum is guaranteed minus excess |
| Depreciation risk | Policyholder bears the risk, as payout reflects current depreciated value | Insurer bears the risk, as payout is fixed regardless of depreciation |
| Available policies | All car insurance policies that cover write-offs and offer vehicle replacement | Comprehensive policies from most insurers, though not all offer it on all vehicles |
| Best suited to | Older vehicles, everyday cars, budget-conscious buyers | Newer cars, luxury or classic vehicles, modified vehicles, financed vehicles |
What is market value car insurance?
Market value cover is the default car insurance option in Australia. It means that if your car is written off or stolen, your insurer determines what the vehicle was worth at the time of the incident and pays you that amount, minus your excess. The payout reflects what a reasonable buyer would have paid for the car in its pre-incident condition, immediately before the loss occurred.
To arrive at this figure, insurers will typically consider the following factors:
- The make and model of the car
- How old it is
- What condition it’s in
- The number of kilometres on the odometer
- Its servicing and repairs history
- Current valuations for equivalent models with RedBook and Glass’s Guide
- Current sales listings for equivalent models
Market value policies generally carry lower premiums than agreed value policies, as the insurer's maximum payout exposure decreases as the vehicle ages and depreciates.
Because market value fluctuates with the used car market and the age of your vehicle, the payout you receive may be lower than you expect, particularly if your car has depreciated significantly since you took out the policy or if used car prices have softened.
What is agreed value car insurance?
Agreed value car insurance involves you and your insurer agreeing on a fixed dollar amount for you to be paid if your car is written off or stolen, minus your excess. Unlike market value cover, you’ll know your payout upfront and it isn’t impacted by the variables that would ordinarily affect its value.
The main advantage of agreed value cover is certainty. If your car is written off or stolen, there's no post-incident negotiation about what it was worth. It also allows you to bump up the sum insured for newer vehicles, luxury or classic cars and those that are under finance, as this can help you avoid having to pay part of your loan out of pocket if your vehicle is written off.
Before agreeing to a value, your insurer will assess the vehicle. It generally won’t agree to a sum significantly above its current market value. It’s worth noting that agreed value is generally only available with comprehensive insurance, not third party cover, and it typically attracts a higher premium than market value cover.
When agreed value might work for you
"If your car is a couple of years old but is in good condition and has low kilometres on the odometer, it’s likely worth more than market value. Be sure to check when comparing car insurance what the current market value rate is. You can use tools like carsales’ free valuation to see how much more your vehicle could be worth. If it’s a few thousand dollars’ difference, it probably makes more sense to opt for an agreed value policy."
Case study: same car, same incident, different coverage
Jake purchases a 2026 Toyota RAV4 GX Hybrid model for $45,990 and takes out a comprehensive policy at the same time with a $700 excess. 18 months later, the car is written off in an accident. Like most new vehicles, the RAV4 has depreciated since he bought it, so his insurer now values it at $42,500.
If Jake chose market value cover, his insurer would pay out $41,800 ($42,500 minus the $700 excess), which is over $8,000 less than what he paid for the car 18 months earlier.
If Jake chose agreed value cover and locked in his car for the full purchase price, his insurer would pay $45,290. In this scenario, Jake is around $3,500 better off than he would’ve been under market value cover.
On the face of it, agreed value comes out ahead in this scenario. However, agreed value policies attract higher premiums, and in this case, Jake would pay an extra $120 per year for this type of coverage. This means that over 18 months, he’s spent $180 more on premiums for a total return of around $3,300.
In this situation, opting for agreed value cover has benefitted Jake, as the RAV4 has strong value retention and therefore doesn’t cost him an arm and a leg. This won’t always be the case, though, so it’s important to consider quotes for each before deciding on your level of cover.
$120 per year difference in annual premium based on real quotes obtained from leading car insurance providers for a 2026 Toyota RAV4 GX on 24 April 2026.
Will I always get to choose between market value and agreed value on my car insurance?
While many insurance providers offer the choice between market value and agreed value coverage, this may only be an option on their comprehensive car insurance policies. Third party property damage and third party fire and theft policies, which offer a lower level of cover, usually only offer market value coverage.
Furthermore, some insurers may only offer one type of cover as standard (often market value), while others may limit certain options based on factors such as the age, make or model of the vehicle. To find out which options are available to you, it’s essential to inquire with your insurance provider.
Which is better: market value or agreed value?
Whether market or agreed value cover is better for you comes down to your vehicle and individual circumstances. Here are a few situations where one may be better than the other:
Agreed value
- Your car is new or nearly new: new vehicles can depreciate by 15% to 30% of their purchase price in the first year alone. Agreed value locks in a payout before that depreciation is realised at claim time, which can make a meaningful difference to what you walk away with.
- Your car is financed: if you still owe money on the vehicle, a market value payout may fall short of the outstanding loan balance, leaving you out of pocket even after the claim is settled. Agreed value provides more predictable protection against this gap.
- Your car is a classic, luxury or modified vehicle: these vehicles can be difficult to value accurately using standard market tools. Agreed value gives you more control over the insured amount and removes the uncertainty of a post-incident market assessment.
- You want certainty over cost: if an unexpectedly low payout would cause you genuine financial difficulty, the higher premium of agreed value cover is worth paying for the peace of mind it provides.
Market value
- Your car is older or lower in value: for a vehicle worth $10,000 or less, the premium saving from market value cover may outweigh the marginal difference in payout that agreed value would provide.
- Budget is your primary concern: market value policies are cheaper, making them a practical choice for drivers who need to keep their insurance costs down.
- Your car's value is stable and easy to verify: standard makes and models with strong used car market data are well served by market value assessment, as the insurer's valuation is less likely to come as a surprise.
