Understanding Agreed Value Auto Insurance: How It Works

Agreed value auto insurance is a type of coverage where the insurance company agrees with the customer on the value of their vehicle when taking out the policy. This type of insurance is often used for classic, antique, or modified cars that don't have a commonly set value or are difficult to assess. Agreed value insurance offers a high degree of protection as the payout is not affected by depreciation, which is a factor in most standard car insurance policies.

Agreed value insurance is for items with high and hard-to-determine values

Agreed value insurance is a type of property insurance that is particularly useful for items with high and hard-to-determine values. It is a policy where the insurance provider agrees to suspend the co-insurance requirement, which is often included in commercial property insurance policies. The co-insurance clause encourages property owners to purchase an acceptable amount of protection by penalising them if they underinsure their property, as they will have to pay out of pocket for a portion of their loss.

Agreed value insurance, on the other hand, guarantees that you will receive the full amount agreed upon in your policy in the event of a loss. This type of insurance is especially relevant for items with high and variable values, as it allows you to set a value with the insurance company and be reimbursed that amount if the item is damaged or lost. This is particularly useful for items that do not have a commonly set value or are hard to assess, such as classic cars, antique cars, or jewellery.

For example, if you own a rare and expensive classic car, an agreed value policy would ensure that you receive the full agreed-upon amount in the event of a claim, rather than a lower amount based on depreciation or market value. This type of insurance is also useful for items that are hard to replace, as it provides the financial security needed to do so.

It is important to note that agreed value insurance typically comes at a higher cost than standard policies, and you will need to have the item appraised before purchasing coverage. However, this type of insurance provides a high degree of protection and peace of mind for valuable and unique items.

It is a type of property insurance

Agreed value auto insurance is a type of property insurance. It is an agreement between the insurance provider and the insured person on the value of a specified item, which is usually decided before the policy is issued. This agreement is based on appraisals, photos, or other relevant documentation. The insurance provider agrees to suspend the co-insurance requirement, which is a clause that penalises the policyholder for underinsuring their property.

The agreed value is the amount the insurance company will reimburse if the insured item is damaged or lost. This value remains fixed throughout the policy term and does not depreciate. However, the insured item will have to be appraised at the start of each new policy term for renewal. Agreed value insurance is typically used for high-value or unique items, such as classic or antique cars, and jewellery.

To purchase an agreed value policy, a statement of property value must be submitted to justify the agreed payout. The process involves assessing the vehicle's classification, condition, and sales of comparable vehicles. Agreed value insurance is not the most common type of insurance and is usually more expensive than standard policies due to the higher level of coverage provided.

It is ideal for classic, antique, or modified cars

Agreed value auto insurance is ideal for classic, antique, or modified cars. This type of insurance coverage allows you to agree with your insurance company on the value of your vehicle when taking out the policy. This is especially beneficial for classic and antique cars, as their value may be higher than that of similar vehicles due to their age, rarity, or modifications.

For example, let's say you own a classic car that has been well-maintained and is in excellent condition. With agreed value insurance, you can explain to the insurance company the work you've put into the car and any modifications or enhancements you've made. The insurance company will then take these factors into account when determining the agreed value of your vehicle.

In the event of a covered total loss, an agreed value policy guarantees that you will receive the full insured amount of the vehicle, including all sales taxes, with no depreciation. This means that if your classic, antique, or modified car is damaged beyond repair, you will be reimbursed for the full agreed-upon value, ensuring that you can replace it with a vehicle of similar value.

On the other hand, a stated value policy, also known as a "stated amount" or "maximum limit of liability" policy, gives the insurer the right to choose between paying you the depreciated cash value of your vehicle or the cost to replace it, whichever is lower. This could result in a smaller payout than you anticipated, leaving you with insufficient funds to replace your classic, antique, or modified car with a similar vehicle.

Agreed value insurance also offers other benefits for classic, antique, and modified car owners. For instance, some insurance companies, such as Hagerty, offer lower premiums for classic and collector car insurance, understanding that these vehicles are prized possessions that will be driven with great caution. Additionally, agreed value insurance can provide flexible usage, allowing you to use your classic car for weekend drives or attending events, rather than just being restricted to occasional pleasure use.

It is also a popular option for insuring jewellery

Agreed value auto insurance is a type of property insurance where the insurance provider agrees to suspend the co-insurance requirement. This means that the insurance company agrees with the policyholder on the value of a covered item, and guarantees to insure it for that fixed amount in the event of a claim. Agreed value insurance is typically used for expensive, modified, or classic vehicles, where depreciation is not a factor in determining the payout.

Agreed value insurance is also a popular option for insuring jewellery. Jewellery is often insured under a separate policy from home insurance, known as jewellery protection insurance (JPI). JPI covers a wider range of scenarios than homeowners insurance, including loss, damage, and theft. It also covers jewellery repair costs for covered items, such as watches. Agreed value coverage for jewellery ensures that the policyholder receives the full amount stated in the policy in the event of a loss, without considering depreciation. This is especially valuable for jewellery, which tends to increase in value over time.

To obtain agreed value coverage for jewellery, a recent bill of sale or an appraisal is usually required to determine the item's value. The premium for this type of coverage is typically higher, ranging from 1% to 2% of the jewellery's appraised value. It is important to note that the retail market value of jewellery can change frequently, so it is recommended to reappraise jewellery every one to three years.

Overall, agreed value insurance for jewellery provides peace of mind and ensures that policyholders receive the full agreed-upon value in the event of a loss, making it a popular choice for insuring valuable jewellery items.

Agreed value insurance is not offered by most insurers

Agreed value insurance is a type of property insurance in which the insurance provider agrees to suspend the co-insurance requirement. This means that the insurer and the insured agree on a fixed amount that the covered item is insured for, and this is reimbursed in the event of a claim, regardless of depreciation. This type of insurance is commonly used for high-value or unique items, such as classic or antique cars, and jewelry.

However, most insurers do not offer agreed value insurance. This is because agreed value insurance differs from other policies in that the insured is guaranteed to receive the full amount agreed upon in the policy in the event of a loss. This can be a costly proposition for insurers, especially for items that do not have a standard value, such as classic cars or rare jewelry.

Insurers that do offer agreed value insurance usually only do so for high-value or unique items. These insurers are typically specialty companies that focus on insuring classic, collector, or modified vehicles, or standard providers that have a specialty insurance partner. Obtaining agreed value insurance may, therefore, require finding a special insurer or a standard provider with a specialty insurance partner.

The additional value of agreed value insurance comes at a cost. Quotes for agreed value insurance are typically higher than for a standard policy, and the insured will need to have the item appraised before purchasing coverage. This appraisal process can be time-consuming and costly.

For these reasons, most insurers do not offer agreed value insurance, and those that do tend to offer it only for specific types of high-value or unique items.

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