Stated Amount Auto Insurance: Understanding Your Policy's Limits

When insuring a vehicle, there are a few different ways to determine the value of your car in the event of a claim. One of these methods is the stated amount, also known as the agreed value. This is when you and your insurance company agree on a set value for your vehicle, which is the amount that will be paid out in the event of a total loss, regardless of the car's actual value. This is different from actual cash value (ACV) insurance, where the insurance company will pay out what they determine to be the typical value of the car at the time of the claim.

Stated amount vs actual cash value

When it comes to auto insurance, the valuation method used can significantly affect your coverage and compensation following an incident. The most common valuation types are Actual Cash Value (ACV), Stated Value, and Agreed Value. Each type has distinct characteristics and applications, suitable for different types of vehicles and owner needs.

Actual Cash Value (ACV)

The actual cash value of a car is what it is worth in its current condition, or the amount you could reasonably expect to get for it if you sold it today. ACV accounts for the vehicle's depreciation, which represents the loss of value since it was purchased. This is determined based on multiple factors, including mileage, wear and tear, and accident history.

If an insurance adjuster declares a car a total loss, they will reimburse the owner for the car's actual cash value (minus the deductible). The threshold for "totaling" a vehicle varies by state and insurer.

Stated Value

Stated value, also known as stated amount, reflects the value the owner believes their vehicle to be worth. This may be the value the owner is willing to accept in an accident in exchange for lower premiums. Owners may need to provide documentation to support their stated value.

Stated value insurance takes into consideration features such as modified or specialized equipment and rebuilt parts, such as a new engine. It is often used for vehicles where the worth might exceed typical depreciated values, such as motorcycles, boats, and RVs.

It's important to note that a stated value policy does not guarantee that the owner will receive this amount in a claim. The insurer will adjust the payout based on the actual cash value of the vehicle at the time of the loss, not exceeding the stated value.

Agreed Value

Agreed value, also known as guaranteed value, is a policy where the insurer and owner agree on the value of the vehicle before the policy is issued. This value is guaranteed if the vehicle is totaled and does not depreciate over time. Agreed value policies are typically used for classic, collector, or antique cars that maintain or increase in value over time.

Choosing the right valuation for your vehicle depends on the type of vehicle you own and how you use it. For everyday vehicles that depreciate normally, ACV is a common choice. For special vehicles or those with fluctuating values, stated or agreed value may better protect your investment.

How to determine a stated amount

A stated amount is the value that you place on your vehicle and submit to your insurer. It is the price you would ask a buyer to pay if you sold your car today. It is important to get the stated amount right, as it can affect your insurance premiums and the amount of money you receive in the event of a claim.

To determine a stated amount, you should consult a publication that specializes in valuing vehicles, such as Price Digests or Truck Paper. Dealerships, manufacturers, and lending or financial institutions can also help you calculate this amount.

When determining a stated amount, you should consider the following:

• Vehicle condition and mileage
• Specialised or modified equipment
• Engine or major component rebuilds

Taking these factors into account will help you produce the most accurate stated amount for your commercial auto insurance.

Stated amount for commercial vehicles

When it comes to auto insurance, a stated amount is the value that you, the policyholder, place on your vehicle. It is the price you would ask a buyer to pay if you sold your car today. This allows you to customise your commercial auto insurance policy to reflect the vehicle's worth, taking into account its condition, any special equipment or upgrades, and any engine or major component rebuilds.

Determining a stated amount involves considering factors such as vehicle condition, mileage, and any modifications or upgrades made. It is recommended to consult specialised publications or seek assistance from dealerships, manufacturers, or financial institutions to arrive at the most accurate valuation.

The stated amount is crucial because it affects how insurance companies process and pay claims. In the event of an accident, the insurer will compare the vehicle's stated amount to its actual cash value (ACV) and pay out the lesser of the two amounts. Therefore, accurately assessing your commercial vehicle's worth is essential to avoid surprises and ensure adequate coverage.

Undervaluing your vehicle can result in insufficient funds to cover the full replacement cost in case of a total loss. On the other hand, overvaluing your vehicle can lead to paying higher insurance premiums without receiving the expected coverage.

Stated amount coverage is typically offered when the value of an insured vehicle is challenging to determine, such as in the case of older trucks or antique automobiles. It provides a way to insure the vehicle for less than its actual worth, resulting in lower insurance premiums. However, it's important to note that the insurance company is not obligated to pay the stated amount in the event of a total loss but will pay the lesser of the stated amount or the ACV.

Stated amount vs agreed value

Stated amount and agreed value car insurance policies are both types of insurance that allow customers to have a say in the value of their vehicle. However, they are not the same thing.

Stated Amount Insurance

Stated amount insurance, also known as stated value, is the value that the policyholder believes their vehicle is worth. This is the value that the policyholder is willing to accept in the event of an accident in exchange for lower premiums. Policyholders may need to provide documentation to support their stated value.

Stated amount insurance is ideal for commercial vehicles with specialised parts, such as refrigeration systems or ploughs, or modified vehicles like commercial vans and trucks. It allows policyholders to insure their vehicles for less than they are worth, resulting in lower premiums.

However, in the event of a claim, the insurance company may compare the stated amount to the actual cash value (ACV) of the vehicle and only pay out the lower value. This means that policyholders could end up receiving a lower payout than expected.

Agreed Value Insurance

Agreed value insurance, also known as guaranteed value, is a type of insurance where the insurer and the policyholder agree on the value of the vehicle before the policy is issued. The agreed value is guaranteed if the vehicle is totalled, and there is no depreciation of value under this type of policy.

Agreed value insurance is typically used for classic, collector, or antique cars, as well as expensive and modified vehicles. It is ideal for vehicles that are appreciating in value due to age or rarity, as it ensures that the vehicle is not undervalued in the event of a total loss payout.

Agreed value insurance usually comes with higher premiums than standard policies, and policyholders may need to have their vehicles appraised before purchasing coverage.

The main difference between stated amount and agreed value insurance is that with stated amount insurance, policyholders may not receive the full stated amount in the event of a claim, while with agreed value insurance, policyholders are guaranteed to receive the full agreed-upon amount.

Stated amount insurance is best for those who want to lower their premiums by insuring their vehicles for less than they are worth, while agreed value insurance is best for those who want to ensure their vehicles are properly valued and protected from depreciation.

Stated value insurance: pros and cons

Stated value insurance is a type of coverage where the policyholder determines the value of their vehicle, which is used to calculate the insurance premium. This type of insurance is commonly used for classic, antique, or modified cars. While it can be a good option for some, it's important to understand the pros and cons before choosing this type of coverage.

Pros of Stated Value Insurance:

• Lower premiums: Stated value insurance allows you to insure your vehicle for less than its actual worth, resulting in lower insurance premiums. This can be especially beneficial if you cannot afford to cover the total value of the vehicle or if you didn't pay the full market value for it.
• Available from standard insurance companies: Stated value insurance is offered by many standard insurance companies, making it more accessible than agreed value insurance, which is typically only available from specialty insurers.
• Potential for higher claim payout: With a stated value policy, you can prove the vehicle's value, which may result in a higher claim payout than what you would receive from a standard insurance policy.

Cons of Stated Value Insurance:

• Total value may not be reimbursed: The main disadvantage of stated value insurance is that the insurance company is not obligated to pay the full stated value in the event of a total loss. Instead, they will pay the lesser amount between the stated value and the actual cash value (ACV), taking depreciation into account.
• Claim payout can be reduced by depreciation: The claim payout for a stated value policy may be significantly less than the stated amount due to depreciation. This is in contrast to agreed value insurance, where depreciation is not a factor.
• May not be suitable for all antique or collectible vehicles: Stated value insurance may not be the best option for rare or unique antique vehicles that are expected to increase in value. In such cases, agreed value insurance may be more appropriate.

It's important to carefully consider your vehicle's value, your budget, and your desired level of coverage before choosing stated value insurance. While it can offer lower premiums, it may not provide the full reimbursement you would expect in the event of a total loss.

Frequently asked questions