When applying for car insurance you generally have the choice between insuring it for the retail value or market value, however, some insurers have now added a third option, agreed value.
The retail value is what it would cost to buy the car from a dealer considering its age, condition, and mileage, whereas the market value is what you’d be able to sell the car for.
“Both retail and market values will depreciate over time, in line with the value of your car. This means that, if your car is written off or stolen and not recovered, your insurance pay-out wouldn’t be enough for you to replace the car with a brand-new model,” said Wynand van Vuuren, King Price client experience partner.
This is where insuring a vehicle for the agreed value can be more beneficial.
“Insuring your car for an agreed value means exactly that: You’ll be covered for an amount that’s agreed between you and your insurer, for an agreed period,” said Van Vuuren.
These policies tend to demand more substantial monthly instalments as the agreed value is usually higher than the market value, but if your car is written off or stolen, you’ll know exactly how much your payout will be and won’t be met with sour surprises.
“Agreed value insurance has traditionally been reserved for classic and rare vehicles that are hard to replace in the open market, but it’s starting to become an option for car owners who want the certainty of knowing how much they’ll be paid out if disaster strikes,” said Van Vuuren.
What affects your car insurance premium
Your monthly car insurance premium is determined by looking at various factors, including:
- Type of car
- Purpose of the car
- Where the car “sleeps”
- Claims history
- Level of coverage
- Owner age and gender
- Excess amount payable
Elements such as the purpose of the car and where it sleeps change over time and can therefore have an impact on your monthly premium after the policy commences.
If a car is suddenly parked in a garage overnight and not on the street anymore it could be beneficial for your monthly instalment, similarly, depending on if a vehicle is used for business or personal purposes will see the insurance payment differ.
The excess amount payable will also allow you to alter your premium by choosing a higher or lower figure. A high excess will result in lower monthly premiums, but beware as this will also make you responsible for paying a bigger chunk of a claim out of your own pocket.
Another important factor, particularly in the current market, is inflation.
When inflation rises so, too, does the cost of labour and replacement parts which ultimately has a knock-on effect on your insurance premium.
The issue could be exacerbated if you drive a rare car of which there are few others on the road, one that was discontinued after it was purchased, or one whose parent brand has since left the country.
Keyword: Agreed value insurance – A new option for everyday car owners