Everything you need to know about agreed value policies
If you have a classic or modified car, or just one that doesn’t fit into the typical car insurance mould, an agreed value car insurance policy could be an option for you, our guide explains how this cover works and when you might need it.
Key takeaways
This type of car insurance guarantees a set payout amount if your car is written off or stolen, based on the car's market value at the policy's start.
Unlike standard policies that pay out based on the car's depreciated value at the time of loss, an agreed value policy ensures you receive a predetermined amount.
To obtain an agreed value policy, you must provide comprehensive documentation to prove your car’s worth.
How does agreed value work?
An agreed value car insurance policy guarantees that if your car is written off or stolen, you will receive a set amount of money for it. This sum is agreed when you set up the policy and it is based on the car’s market value at that point.
These policies aren’t standard and are mainly used for people who have slightly unusual cars. This can include classic cars, kit cars, those with modifications, and high-performance cars.
Without an agreed value car insurance policy, a standard car insurance policy would pay out an amount of money based on the car’s value at the time, if it’s written off or stolen and can’t be repaired. This could be less than the amount you paid when you bought the car and when you first took out the insurance policy.
With an agreed value policy, you’ll be guaranteed a set amount so there’s no risk of losing money - however these policies are more expensive than standard car insurance cover, so you will also pay higher monthly premiums.
When do I need an agreed value policy?
The majority of cars won’t be suitable for an agreed value policy, as they are only really used for unique cars.
These cars are unusual because it’s harder for an insurer to calculate how much it would cost to replace them. A unique classic car, for example, in a good condition may be worth far more than the standard market value for the vehicle’s model.
Therefore, with a specialist policy, you will always know how much money you’ll receive from your insurer if it's written off or stolen. The following cars could be suitable for an agreed value policy:
Classic cars: vintage or classic cars which are often considered a collector’s item
High-performance cars: powerful and expensive high-performance cars such as top-of-the rage sports cars and SUVs
Modified cars: any car you’ve made modifications to, from alloy wheels to suspension changes
Kit cars: cars that can be built at home following a kit which often take a lot of time and effort to make and are one-off creations
Imported cars: unusual or unique cars that have been imported from another country
Motorhomes: vehicles that have been converted, such as motorhomes or campervans, which can’t be compared to standard models when it comes to cost
Do I need to prove how much my car is worth?
When you take out agreed car insurance, you will need to prove to an insurer how much your car is worth. This involves supplying evidence so it can calculate the car’s market value, and you can agree on the amount it’ll pay out if you need to claim. You may have to supply the following information for your insurer:
Photos: you’ll need to take photos of the inside and outside of the car, including the engine, and any unique parts of the car or modifications
Receipts: the insurer will need to see a copy of the receipt from when you bought the car and you may need to show examples of similar cars, with their price
Documentation: if you’ve made changes to the car or it’s been repaired, you’ll need to show any letters or receipts detailing what has taken place
Valuation: depending on the type of car, an insurer may ask for an independent valuation of your car
Pros and cons of agreed value policies
Agreed value car insurance can be a good option for certain cars, but it is more expensive than standard car insurance so it won’t be for everyone. Here we look at the main pros and cons:
Pros:
If your car’s written off or stolen while you have the policy in place, you’ll be paid a guaranteed amount
You will usually be paid more than if you had a standard car insurance policy
With the insurer’s pay out, you should be able to buy a similar car
Lots of unique and unusual cars can be covered
Cons:
Your premiums could be more expensive than with standard car insurance
There is less choice as most car insurers don’t provide this cover
If you have an independent valuation you may have to pay for it
You agree a set amount of money for a pay out at the start of the policy, but if your car drops in value, you could end up paying for a more expensive policy than you need
Do I need an agreed value policy for a brand new car?
If you have a brand new car, you may not need an agreed value car insurance policy. That’s because most car insurance policies automatically provide 'new for old' cover for the first 12 months with new cars.
This means if the car is written off or stolen, your insurer will replace it with an identical car, so there’s no extra benefit from having an agreed value policy. This is because there’s no risk of the insurer’s pay-out being worth less than the car.
What’s the difference between agreed value and stated amount?
If you have a stated amount car insurance policy, you set the amount your car will be covered for and you can change this if you want to lower your monthly premiums. But with an agreed value car insurance policy, you and your insurer agree the amount at the start when you buy the policy, and this amount remains the same.
