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Agreed Value Car Insurance Calculator – While renewing your car insurance, you’ve probably come across some confusing terms. You’ve probably seen Contract Value, Market Value, and Sum Insured when deciding how much to insure your car. You’ve probably also seen them while researching the best auto insurance plans or reading brochures about auto insurance products.
It is important to first understand the terms included, especially if you are buying a comprehensive policy. Your choice will affect the amount of insurance payout if you file a claim for theft or total loss.
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In essence, you can be more confident when choosing the best insurance policy for your car if you understand what sum insured, contract value and market value mean.
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Simply put, sum insured is defined as the sum insured of your car which you can decide based on the current market value. The value of your car depreciates every year and generally the sum insured you choose also decreases accordingly.
By choosing the right level of coverage, you can avoid over- or under-insuring your car. You will not receive full compensation for loss or damage to your vehicle if your vehicle is underinsured. In contrast, if you’re overinsured, you’ll pay a higher (and unnecessary) premium. This is because the amount of compensation you will receive is still limited to the current market value of your vehicle.
As part of the purchase process, you will usually be given two options for sum insured: market value or negotiated value. However, the options you have will depend on the policy and your insurer.
Not to be confused with the term ‘current market value’, insuring your car based on market value means that the insurer will determine the value of your car based on its current market value at any given time. This means that in the event that you file a claim for total loss or theft, the insurer will assess your claims based on the current market value of your vehicle at the time of loss.
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The current market value of the car is derived from several different sources depending on the insurer. Some insurers use data provided by Insurance Services Malaysia (ISM), while others may use their own data sources.
The benefit of insuring your car based on market value is that you are likely to pay cheaper premiums annually, although the difference can sometimes be negligible. However, if you file a claim for total loss or theft, you may receive less payout than the sum insured because your car would have depreciated when the claim was filed.
Also consider that you may have to pay back the payday loan with your own money even after the entire arrangement is done. This can happen, especially if you still have a large outstanding balance owed to the bank.
Ali’s car was valued at RM50,000 when he bought the insurance seven months ago. He chose to insure his car based on market value for the sum insured of RM50,000. His car was recently stolen and he filed a claim with his insurer. If his claim is approved, the insurer will compensate based on the market value of the car at the time of loss. Let’s say that at the time of the loss, the market value for a similar model was only RM40,000. However, Ali’s car still has a bank loan and the balance of the loan is 44,000 ringgit. If the collective agreement is approved, Ali will still have to pay the additional RM4,000 out of pocket.
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Agreed value means that your car is insured based on an amount that the insurer and you have agreed upon. Under a negotiated value agreement, the amount of insurance offered to you is calculated in advance based on your car’s model, year and several other factors at the time of purchase. If you make a claim for total loss or theft in the future, the insurer will indemnify you in full according to the sum insured you choose, regardless of the current market value.
Payout is not affected by depreciation when you have an agreed value policy and you can have peace of mind without having to guess the payment amount.
Jane chose to insure her car for RM50,000 based on the agreed value. After six months, her car broke down beyond repair and she filed a total loss claim with the insurer. The insurer will pay her RM50,000 as agreed in the policy. Let’s say Jane owes the bank RM44,000 on her car loan. In this case, she can pay off her bank loan and keep the remaining RM6,000.
The short answer is that it depends on individual preference. Consider the following factors before deciding on the sum assured.
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With an agreed value policy, you can get an adequate payout for your car without worrying about depreciation or underinsurance. The market value option, on the other hand, can save you a few ringgit depending on the insurer you choose.
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Disclaimer: This blog post is for informational purposes only and should not be taken as advice of any kind. disclaims all responsibility for any losses arising from reliance on the information contained in this article. The declared amount and negotiated value of car insurance policies determine the value of the vehicle as agreed between the insurer and the owner, but there are some striking differences.
Quoted amount and negotiated value car insurance policies allow owners to reach an agreement with an insurance company about the value of their vehicle, but they are not the same thing.
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These policies can help owners secure lower insurance costs or a higher estimate for custom parts. These usually apply to unique vehicles and may be harder to find than traditional auto insurers.
Declared amount insurance – also known as declared value – reflects the value you think your vehicle is worth. This may be the value you are willing to accept in an accident in exchange for lower premiums. You may need to provide documentation to support your claimed value.
Quoted amount insurance can be the best way to value commercial vehicles. These vehicles often have special modifications attached, such as refrigeration systems or plows.
Another important component of the insurance appraisal to understand is the actual cash value. Actual cash value is what the vehicle was worth at the time of the accident. The insurance company can compare the stated amount and the actual cash value, paying only the lower value.
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Part of the purpose of stated amount insurance is to reduce the cost of premiums by lowering your expectations of the value of your car. That’s why it’s important to get the exact amount claimed. That way, you’re not overpaying your premiums just to get a lower actual cash value.
Negotiated value — also known as guaranteed value — is a car insurance policy that establishes the value of a vehicle jointly between the insurer and the owner. Usually used for classic or antique vehicles.
The value agreed between the insurer and the owner is guaranteed if the vehicle is totaled. There is no amortization of value with this type of policy.
Both stated amount and agreed value policies are types of insurance where customers have a say in the value of their vehicle. These values may be based on modifications that owners have made to the vehicle or unique, valuable features.
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The specified amount for car insurance allows you to specify the value of the car you want to insure. It is ideal for modified vehicles such as commercial vans and trucks. You can choose a value that is acceptable to you so that you can lower your premiums.
Negotiated value car insurance makes you work with your insurance company. Together, you agree on the car’s value based on documentation and appraisals. Negotiated value car insurance prevents undervaluing a car that appreciates due to age or rarity. Proper valuation is important in the event of an insured total loss payment.
Both the stated amount and agreed value insurance policies are for unique vehicles. The quoted amount is best for determining an acceptable value for your commercial vehicle and thus reducing your premiums. Negotiated value is ideal for establishing a guaranteed value for your collector car, which can be a high value.
If you decide to purchase a stated amount or agreed value policy, be prepared to work with your insurer. You may need to provide them with documentation to determine the car’s value. Keep records as:
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It is important to remember that most insurers do not provide this type of policy. So if you’re considering shopping for one, prepare for a potentially long search.
The car insurance comparison tool can help you find and compare insurance policies in minutes. You can get an apples-to-apples comparison of plans from over 40 of the top insurance providers and find savings.
If you’re looking for ways to lower your monthly expenses, it might be a good idea to see if you can save on your car insurance.
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