When you insure your car or other assets, you typically choose between agreed value and market value. This choice affects how much you receive if your vehicle is written off or a total loss is declared.
With agreed value insurance, you and your insurer agree on a specific dollar amount for your vehicle (or asset) when you take out or renew the policy. If your vehicle is written off or stolen, you receive this agreed amount (minus your excess), regardless of what the vehicle might be worth on the open market at the time of the claim.
The agreed value is typically set based on the vehicle's market value at the time of policy inception, though you may be able to negotiate a higher value if you have modifications, low mileage, or the vehicle is in exceptional condition.
Agreed value provides certainty - you know exactly what you will receive in a total loss situation. This is particularly valued by owners of classic cars, modified vehicles, or vehicles that may be difficult to value using standard market guides.
With market value insurance, your vehicle is insured for whatever it is worth on the open market at the time of the claim - not when you took out the policy. This means the payout can go up or down depending on market conditions, depreciation, and the condition of your vehicle.
Insurers typically use industry valuation guides (such as the Red Book or Trade Me listings) to determine market value. They may also consider the vehicle's age, mileage, condition, and recent sale prices of similar vehicles.
Market value policies generally have lower premiums than agreed value policies because the insurer's maximum liability decreases as the vehicle depreciates. However, there is less certainty about what you will receive in a total loss.
Here is how agreed value and market value compare across the key factors that matter when choosing your cover.
| Feature | Agreed Value | Market Value |
|---|---|---|
| Payout amount | Fixed at policy inception | Determined at time of claim |
| Certainty of payout | High - you know the amount upfront | Lower - depends on depreciation and market |
| Premium cost | Generally higher | Generally lower |
| Depreciation impact | None - payout is locked in | Payout decreases as vehicle depreciates |
| Best for newer vehicles | Yes - protects against rapid depreciation | Can work if premiums are a priority |
| Best for older vehicles | Less common; may not be offered | Often the default option |
| Classic/modified vehicles | Strongly suited | May undervalue modifications |
| Risk of over-insuring | Possible if value set too high | Not applicable - based on current value |
| Risk of under-insuring | Possible if not reviewed at renewal | Possible if market guides undervalue the vehicle |
Neither option is universally better - the right choice depends on your vehicle and priorities. Here are some common scenarios:
For new or near-new vehicles, agreed value is commonly chosen because new cars depreciate rapidly in the first few years. With market value, you could face a significant gap between what you paid and what your insurer pays out.
For older vehicles with lower values, market value is often the default and may be the only option offered. The premium savings of market value are more meaningful when the vehicle's value is lower.
For classic cars, modified vehicles, or imports, agreed value is often essential. Standard market value guides may not accurately reflect the true value of these vehicles. Classic car insurance specialists typically offer agreed value as standard.
For vehicles with finance owing, agreed value can be important. If you owe more on the vehicle than its market value (sometimes called being "upside down" on a loan), a market value payout may not cover your remaining loan balance.
Most major NZ insurers offer both agreed value and market value options for car insurance, though availability and terminology varies.
| Insurer | Agreed Value | Market Value | Notes |
|---|---|---|---|
| AA Insurance | Yes | Yes | Agreed value available on comprehensive policies |
| Tower | Yes | Yes | Market value is the default; agreed value optional |
| AMI | Yes | Yes | Both options available on comprehensive car insurance |
| State | Yes | Yes | Agreed value reviewed at each renewal |
| Cove | Yes | No | Agreed value is standard on Cove comprehensive policies |
| Vero | Yes | Yes | Available through broker channel |
Check directly with your insurer for the most current options and pricing. Valuation methods and availability may differ for other types of insurance such as motorcycle, motorhome, or boat insurance.
See how agreed value and market value options compare across NZ car insurance providers.
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