What is an agreed value car insurance policy?
If you have a classic or modified car an agreed value car insurance policy could be a useful option. Here’s how this cover works, when you might need it, and what to do next.
Key takeaways
Agreed value 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 get an agreed value policy, you’ll need to have comprehensive documentation to prove your car’s worth
How does agreed value car insurance 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, such as classic cars, kit cars, those with modifications, and high-performance cars.
In contrast, a standard car insurance policy pays out an amount of money based on the car’s value at the time it’s written off or stolen. This can 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, there’s no such risk of losing money. But these policies are more expensive than standard car insurance cover, so you will also pay higher monthly premiums.
Do I need an agreed value policy for my car?
Probably not… unless you have a unique car. Unusual cars are tricky to insure on a standard car insurance policy because it’s harder for an insurer to calculate how much it would cost to replace them.
A unique classic car in good condition, for example, may be worth far more than the standard market value for the vehicle’s model, so an agreed value classic car insurance policy may fit the bill.
Unique cars that could be suitable for an agreed value policy include:
Kit cars (cars that can be built at home)
Imported cars
Motorhomes
How do I prove how much my car is worth?
You may have to supply the following information for your insurer when you take out agreed car insurance:
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.
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.
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.
Depending on the type of car, an insurer may ask for an independent valuation of your car.
Photos
Receipts
Documentation
Valuation
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 are the key things to weigh up before you jump into the agreed value insurance world:
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?
Probably not. 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.
There’s therefore no extra benefit from having an agreed value policy because there’s no risk that the insurer’s pay-out will be 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. You can also change it 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 that value doesn’t change.
