Choosing between market value and agreed value affects how much you receive if your car is written off or stolen. This guide puts real numbers behind each option so you can see exactly how payouts differ - and when each one may work in your favour.
Before getting into the numbers, it helps to be clear on what each term means in the context of NZ car insurance.
Market value means your insurer will pay you what your car is worth on the open market at the time you make a claim - not when you first took out the policy. They typically use industry tools like the Red Book, recent Trade Me listings, and dealer pricing to arrive at a figure. Because car values drop over time, a market value payout will almost always be less than what you originally paid for the vehicle.
Agreed value means you and your insurer lock in a specific dollar amount when you take out or renew the policy. If your car is written off or stolen, you receive that agreed figure (minus your excess), regardless of what the car might be worth on the open market at the time. The amount is fixed until your next renewal.
Both options apply to comprehensive car insurance policies. Third party and third party fire and theft policies don't include cover for damage to your own vehicle, so the valuation method is only relevant when you have full cover.
Our guide to understanding agreed value explains the general concept in more detail. This guide focuses on putting real numbers side by side so you can see how the choice plays out in practice.
On paper, the difference sounds straightforward - one is fixed, one floats. But in practice, the gap between the two can be significant, and it grows wider as your car gets older.
With market value, your payout decreases every year as your car depreciates. You never quite know what your insurer will determine the car is worth until you actually make a claim. This can lead to unpleasant surprises - the Insurance and Financial Services Ombudsman (IFSO) handles a steady stream of complaints from drivers who expected a higher market value payout than they received.
With agreed value, the number is right there in your policy schedule. No arguments, no waiting for a valuation assessment. The trade-off is that agreed value policies generally cost more in premiums because the insurer is taking on more risk - they're guaranteeing a payout figure that may be higher than the car's actual market worth down the track.
There's also a timing difference. Market value is assessed after the event, which means your insurer has the final say on the number (though you can dispute it). Agreed value is set before the event, which means both parties have already committed to the figure.
The practical impact? If you bought a car for $25,000 and it's written off three years later, a market value policy might pay out $16,000 to $18,000. An agreed value policy set at $25,000 would pay $25,000 minus your excess. That's a difference of $7,000 to $9,000 in your pocket.
Numbers speak louder than definitions. The table below shows what a payout might look like at different stages of car ownership, assuming a vehicle purchased new for $35,000 with typical NZ depreciation rates.
These figures are indicative only - actual depreciation varies by make, model, mileage, and condition. But they illustrate the gap between market value and agreed value payouts over time, and why the choice matters more the newer your car is.
| Years After Purchase | Approx. Market Value | Market Value Payout | Agreed Value Payout ($35,000) | Difference |
|---|---|---|---|---|
| Brand new (year 1) | $28,000 - $30,000 | $27,500 - $29,500 | $34,500 | $5,000 - $7,000 |
| 2 years | $23,000 - $25,000 | $22,500 - $24,500 | $34,500 | $10,000 - $12,000 |
| 3 years | $19,000 - $21,000 | $18,500 - $20,500 | $34,500 | $14,000 - $16,000 |
| 5 years | $14,000 - $16,000 | $13,500 - $15,500 | $34,500 | $19,000 - $21,000 |
| 7 years | $9,000 - $12,000 | $8,500 - $11,500 | $34,500 | $23,000 - $26,000 |
| 10 years | $5,000 - $8,000 | $4,500 - $7,500 | $34,500 | $27,000 - $30,000 |
Important: The agreed value column assumes the value was set at $35,000 and never adjusted at renewal. In reality, most insurers review the agreed value at each renewal, and you would typically lower it over time to reflect depreciation - otherwise you may be paying more in premiums than necessary. The point of the table is to show the structural difference between a fixed and a floating payout.
A more realistic scenario: you buy a car for $35,000, set the agreed value at $35,000, and reduce it by $2,000 to $3,000 at each annual renewal. After three years, your agreed value might sit at around $27,000 - still higher than the $19,000 to $21,000 market value, but not the full $35,000.
For a deeper look at what happens when a total loss occurs, see our guide to car write-offs in NZ.
Both valuation methods have genuine strengths and drawbacks. The right choice depends on your vehicle, your financial situation, and how much certainty you want about a potential payout.
How the two valuation methods compare for NZ car insurance
Depreciation is the silent factor that eats into market value payouts year after year. Understanding how quickly cars lose value in New Zealand helps explain why the gap between market value and agreed value widens over time.
New cars depreciate fastest in the first three years. According to Interest.co.nz and NZ motor trade data, a typical new car in New Zealand loses roughly 15% to 20% of its value in the first year alone. By the end of year three, most vehicles are worth 40% to 55% of their original purchase price. After five years, that figure drops to around 30% to 40%.
Some vehicle types depreciate faster than others. Luxury European vehicles tend to lose value more quickly in NZ than Japanese-made models, which hold their value relatively well. Utes and SUVs have historically depreciated more slowly than sedans, though this varies with market demand.
For market value policyholders, this depreciation curve is the key risk. Every year that passes, the gap between what you paid for the car and what your insurer considers it worth gets larger. If you bought a $30,000 sedan and it's worth $18,000 three years later, that's a $12,000 difference that you would need to cover out of your own pocket to replace the vehicle with an equivalent new one.
The Canstar NZ car insurance pages note that depreciation is one of the most commonly misunderstood aspects of car insurance, with many policyholders unaware of how much their vehicle's insured value has dropped since they first took out cover.
How quickly vehicles lose value - and what it means for your payout
Most major NZ car insurers offer both options, but the default setting, terminology, and availability can vary. Here is a summary of what the main insurers offer as at early 2026.
| Insurer | Market Value | Agreed Value | Default Option | Notes |
|---|---|---|---|---|
| AA Insurance | Yes | Yes | Market value | Agreed value available on comprehensive policies; AA car insurance |
| Tower | Yes | Yes | Market value | Agreed value optional at an additional premium; Tower car insurance |
| AMI | Yes | Yes | Market value | Both options available for comprehensive cover; AMI car insurance |
| State | Yes | Yes | Market value | Agreed value reviewed annually at renewal |
| Cove | No | Yes | Agreed value | Agreed value is standard on Cove comprehensive policies |
| Vero | Yes | Yes | Varies | Available through broker channel; options depend on the broker |
It is worth noting that Cove, an insurance brand that operates entirely online, uses agreed value as its standard approach for comprehensive car insurance. This means Cove policyholders always know their payout figure upfront.
The premium difference between market value and agreed value varies by insurer, vehicle type, and the agreed amount you set. As a rough guide, agreed value policies tend to cost 5% to 15% more in premiums than market value for the same vehicle - though this gap narrows for older cars with lower values.
Features and options change over time. Always check directly with each insurer for their most current policy terms and pricing. The Insurance Council of New Zealand (ICNZ) maintains a directory of licensed insurers if you want to explore the full range of options available in NZ.
There is no single right answer - the best choice depends on your specific situation. Here are some common scenarios where each option tends to work well.
Market value may suit drivers who:
Agreed value may suit drivers who:
Some drivers also switch between the two over time. It is common to start with agreed value when a car is new and the depreciation risk is highest, then switch to market value after four or five years when the rate of value loss slows down and the premium savings become more meaningful.
The Consumer NZ car insurance guide has useful background on choosing between the two, and Sorted.org.nz offers a neutral overview of car insurance decisions more broadly.
If you go with agreed value, the amount you set matters. Too high and you are paying more in premiums than necessary. Too low and you may not receive enough to replace your vehicle if the worst happens.
Research your car's current market value first. Before setting an agreed value, check what similar vehicles are selling for on Trade Me, at Turners, and through local dealerships. This gives you a realistic baseline. Setting your agreed value at or slightly above the current market value is a common approach.
Factor in modifications and accessories. If you have added anything to the car - a tow bar, upgraded stereo, alloy wheels, bull bar, or other accessories - make sure the agreed value includes the cost of these items. Undeclared modifications may not be covered.
Review the agreed value at every renewal. Cars depreciate, and your agreed value should reflect this. If you set it at $30,000 in year one, you might adjust it to $26,000 in year two and $22,000 in year three. This keeps your premiums aligned with the car's actual worth.
Don't over-insure just for a bigger payout. Some drivers set the agreed value well above the car's worth, thinking they will get a windfall if it's written off. Insurers are aware of this and may question or refuse an agreed value that looks inflated. More importantly, you will be paying higher premiums every year for a value that may not be accepted at claim time.
Ask your insurer for guidance. Most insurers have tools or advisers who can help you land on an appropriate agreed value. Tower and AA Insurance, for example, both provide online tools that indicate a fair value range for your vehicle based on its make, model, year, and mileage.
Getting the agreed value right is a balance. The goal is a figure that accurately reflects what it would cost to replace your car with a similar vehicle in similar condition - no more, no less.
See estimated premiums from NZ car insurers side by side. Compare market value and agreed value options and find the right cover for your situation.
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