Ok this might be a random question.
Is it better to have Agreed Value or Market Value for your insurance?
My bank just changed my insurance to Market Value but I had insurance for agreed (different company) I just want to know which one would be better to stay with (as we know banks are non-forthcoming with information.)
Thanks
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Insurance Question
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The X
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It can be a double edged sword.
"Market value" will be the value of the car at the time of the incident occuring. Insurance companies love this, because when you renew your premium your market value in say January might be $20,000 - however say you have an write off accident in Nov, your market value then might be $18,000. Works out better for the insurance company, $2k saving for them!
"Agreed value" - this can be dangerous. People are emotionally attached to big ticket items and there is a big disconnected between perception of the $ value they see for their car and the realistic $ value for the car. Over insure and you're paying too much premium wise and if you have a large smash, it's unlikely to get written off.
Your car might be worth $19,000 at current value - you want to insure it for $30,000 (basically what you paid for it - we're exagerating the over inflated agreed value just for demonstration's sake). Say you have a big smash. Total repair bill $17,000. If you were insured for $19,000 agreed value - the insurer would look at this and go, hmm $2,000 difference - not worth repairing it. I can take the wreck, give you $19,000, I can then sell the wreck for parts and maybe get $5,000 for it.
So as the insurer my net loss was $19,000 less the $5,000 = $12,000 - that's $5,000 less that if I had to repair your car for you!
Conversely, had your policy been for $30,000 and i looked at the repair bill. Hmmm i can repair the car for $17,000 or I could pay you out $30,000 and sell the wreck for $5,000 so it's a choice of being out of pocket for $25,000 to pay you out or $17,000 to repair. I'm gonna force you to repair the car and you end up with a car that's never gonna be the same as before.
Yes the over inflated agreed value is over the top, but it's just for illustration....
"Market value" will be the value of the car at the time of the incident occuring. Insurance companies love this, because when you renew your premium your market value in say January might be $20,000 - however say you have an write off accident in Nov, your market value then might be $18,000. Works out better for the insurance company, $2k saving for them!
"Agreed value" - this can be dangerous. People are emotionally attached to big ticket items and there is a big disconnected between perception of the $ value they see for their car and the realistic $ value for the car. Over insure and you're paying too much premium wise and if you have a large smash, it's unlikely to get written off.
Your car might be worth $19,000 at current value - you want to insure it for $30,000 (basically what you paid for it - we're exagerating the over inflated agreed value just for demonstration's sake). Say you have a big smash. Total repair bill $17,000. If you were insured for $19,000 agreed value - the insurer would look at this and go, hmm $2,000 difference - not worth repairing it. I can take the wreck, give you $19,000, I can then sell the wreck for parts and maybe get $5,000 for it.
So as the insurer my net loss was $19,000 less the $5,000 = $12,000 - that's $5,000 less that if I had to repair your car for you!
Conversely, had your policy been for $30,000 and i looked at the repair bill. Hmmm i can repair the car for $17,000 or I could pay you out $30,000 and sell the wreck for $5,000 so it's a choice of being out of pocket for $25,000 to pay you out or $17,000 to repair. I'm gonna force you to repair the car and you end up with a car that's never gonna be the same as before.
Yes the over inflated agreed value is over the top, but it's just for illustration....
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Josh_Emerton
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Double edged sword, as Pete said. Depends on personal preference really, there's advantages and disadvantages to both.
Market Value:
Advantage: Larger crash, more likely to be written off, but will only pay out the market value at time of crash. Lower premiums, that keep getting lower.
Disadvantage: Car keeps getting less valuable, insurance pays out less and less over time. A crash in 2008 might have paid out 21,400, but a crash now would only pay out 12,000 or whatever (assuming a write off)
Agreed value:
Advantage: Car value stays the same. Insurance company always looks at your car as one price - 21,400 in your case.
Disadvantage: A crash when the car is valued at 21,400 when market value is 12,000 will almost never be a write off. Write off's are based on % of car value cost to repair. as its insured for almost double what its worth, you'll almost always have to repair the car, never write it off. and as i know all too well.. one slight dent and the cars never the same ey. Another disadvantage - higher premiums that always stay high.
Market Value:
Advantage: Larger crash, more likely to be written off, but will only pay out the market value at time of crash. Lower premiums, that keep getting lower.
Disadvantage: Car keeps getting less valuable, insurance pays out less and less over time. A crash in 2008 might have paid out 21,400, but a crash now would only pay out 12,000 or whatever (assuming a write off)
Agreed value:
Advantage: Car value stays the same. Insurance company always looks at your car as one price - 21,400 in your case.
Disadvantage: A crash when the car is valued at 21,400 when market value is 12,000 will almost never be a write off. Write off's are based on % of car value cost to repair. as its insured for almost double what its worth, you'll almost always have to repair the car, never write it off. and as i know all too well.. one slight dent and the cars never the same ey. Another disadvantage - higher premiums that always stay high.
Even neglecting the comments above, theres going to be advantages and disadvantages either way. With agreed value, at least you know what you're in for, whereas with market value it could be good or bad and you won't know until you claim.
"Market value" isn't set in stone either. When my girlfriend's old liberty was written off a few years ago, QBE offered I think about $2000 initally to pay us out. Her dad, who is our insurance broker, told them "like hell you are" and ended up getting about $5000 for it. In reality if I was to have sold that car I would have probably listed it for $3000 and taken $2000 after a month.
Market value is there to be debated - it can work for or against you. Agreed value provides a bit of 'insurance' for lack of a better word.
"Market value" isn't set in stone either. When my girlfriend's old liberty was written off a few years ago, QBE offered I think about $2000 initally to pay us out. Her dad, who is our insurance broker, told them "like hell you are" and ended up getting about $5000 for it. In reality if I was to have sold that car I would have probably listed it for $3000 and taken $2000 after a month.
Market value is there to be debated - it can work for or against you. Agreed value provides a bit of 'insurance' for lack of a better word.
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