Comprehensive car insurance gives you a choice in how your car is valued if it's written off or stolen: market value or agreed value. This choice, made when you take out the policy, is an important one when it comes to deciding how much you're paid out, but it's easy to overlook while comparing premiums.
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. If your car is written off or stolen, your insurer pays out what it was worth immediately before the incident, minus your excess, not what you originally paid for it.
Insurers typically base this figure on:
- The make, model and age of the car
- Its condition, odometer reading and service history
- Current valuations for equivalent models with RedBook and Glass's Guide
- Current sales listings for equivalent models
Market value premiums are generally cheaper than agreed value, since the insurer's payout exposure shrinks as the car ages. However, the payout itself can come in lower than expected, especially if your car has depreciated more than you realised or used car prices have softened.
What is agreed value car insurance?
Agreed value car insurance is a fixed dollar amount you and your insurer agree on, paid out if your car is written off or stolen, minus your excess. Unlike market value cover, your payout is set up front and isn't automatically reduced by depreciation.
The main advantage is certainty, as it lets you set a higher sum insured for more valuable vehicles, including newer, luxury and classic models, as well as those under finance. Your insurer will assess the car first and generally won't agree to a sum well above its market value. That figure isn't fixed forever, either, with insurers able to revise it at renewal, though this is usually negotiable.
Agreed value is typically only available with comprehensive cover and costs more than market value in most cases.
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. The RAV4 has very strong value retention, 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 $4,000 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 retained most of its value and therefore doesn’t cost him an arm and a leg. This won’t be the case with most cars, though, so it’s important to consider quotes for each before deciding on your level of cover.
$120 per year difference in annual premium is an illustrative estimate based on real quotes obtained from leading car insurance providers for a 2026 Toyota RAV4 GX in September 2026.
Market value vs trade-in value
Market value isn't the same as a trade-in offer from a dealership. A trade-in figure reflects what a dealer is willing to give you against a new purchase, and it factors in their own margin, reconditioning costs and how easily they expect to resell the car. It's typically lower than what the car would fetch on the open market (its market value).
This distinction matters if you're weighing up whether your insurer's valuation seems fair. A low trade-in quote from a dealer isn't a reliable benchmark for what your insurance payout should be. If you want an independent check, there are online tools or paid valuations you can take out that give you a sense of current market value before you compare cover or lodge a dispute over a payout.
Can I choose between market value and agreed value on my third party car insurance?
While many insurance providers offer the choice between market value and agreed value coverage, this is usually only only an option on their comprehensive car insurance policies. Third party property damage (TPPD) and third party fire and theft (TPFT) 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 enquire with your insurance provider.
Which is better: market value or agreed value?
Whether market or agreed value cover is better suited to your needs comes down to your vehicle and individual circumstances.
Agreed value may suit you if:
-
Your car is new or nearly new
New vehicles can lose a significant share of their purchase price in the first year. Agreed value locks in a payout before that depreciation is realised at claim time.
-
Your car is financed
A market value payout may fall short of your outstanding loan balance, leaving you out of pocket even after the claim is settled. Agreed value protects against this gap.
-
Your car is a classic, luxury or modified vehicle
These vehicles can be hard to value accurately using standard market tools. Agreed value gives you more control over the insured amount and avoids the uncertainty of a post-incident assessment.
-
You want certainty over cost
If an unexpectedly low payout would cause genuine financial difficulty, the higher premium is worth paying for peace of mind.
Market value may suit you if:
-
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 payout difference agreed value would provide.
-
You want to pay less for car insurance
Market value policies are cheaper, making them the practical choice if you need to keep 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, since the insurer's valuation is less likely to come as a surprise.
