Agreed value insurance

What is agreed value coverage?

Agreed value coverage is a type of auto insurance where you and your insurance company agree on your car’s value when the policy starts. Unlike standard policies, which pay out based on your car’s depreciated market value at the time of loss, agreed value coverage guarantees a specific payout amount if your vehicle is stolen or declared a total loss. Standard policies pay based on your car’s current value, which includes depreciation. However, agreed value insurance is a term used in motor insurance that many owners do not fully understand.

Agreed value coverage locks in a set amount, while stated value may not guarantee the full payout, providing more certainty and potentially higher payouts. While agreed value policies are beneficial for classic and collector cars, they may come with higher premiums compared to standard policies. Understanding the benefits and drawbacks of each type of policy is crucial for making an informed decision.

This type of coverage is ideal for classic cars, collectible models, custom builds or any vehicle that holds value beyond what standard valuation tools might reflect. It makes sure that you receive the full, agreed-upon amount regardless of your car’s current mileage or age when a claim is made.

How does agreed value coverage work?

The process starts when you and your insurance company agree on your vehicle’s agreed upon value, often based on professional appraisals, photos and documentation. Getting agreed value coverage may take a bit more work. You’ll need to provide more details about your vehicle than with a standard policy. Once the value is locked in, it’s included in your policy as the fixed payout amount for total losses. The agreed value becomes fixed for the policy period, typically 12 months.

Here’s how it typically works:

• You provide evidence like a third-party appraisal and photos.
• The insurance carrier reviews the materials and sets a fixed value.
• If your car is stolen and not recovered, or totaled in an accident, you receive that agreed value—without depreciation adjustments. If your car is totaled, your insurance carrier pays the agreed amount.

This predictability makes agreed value policies especially appealing for high-value or rare vehicles.

What does agreed value cover?

Agreed value policies are designed for significant, non-recoverable losses. They offer strong protection in case your car is stolen or completely destroyed. These policies cover total losses—like theft, collisions, or natural disasters. For everything else, standard coverage still applies.

Covered scenarios typically include:

• Theft – When the car isn’t recovered.
• Total loss from a crash – If repair costs exceed the vehicle’s value.
• Natural disasters – Fire, floods or severe weather damage.

However, these policies do not cover:

• Partial losses or cosmetic damage (handled by your regular policy)
• Normal wear and tear or mechanical issues
• Undocumented custom parts or accessories unless explicitly included in the valuation

Understanding these boundaries helps you manage expectations and avoid surprises during a claim.

Who should consider agreed value insurance?

You should consider agreed value coverage if your car’s worth isn’t properly reflected by standard pricing guides. This applies to:

• Classic or antique vehicles
• Customized cars with performance or cosmetic upgrades
• Collectible or rare models
• Vehicles with significant sentimental or investment value

Collector car owners should consider agreed value insurance, as it offers higher payouts based on a vehicle's value that is predetermined rather than subject to depreciation, protecting their investment.

If you’ve spent time or money restoring your car, or if it’s a prized possession, agreed value coverage can provide peace of mind that you’ll be properly compensated if the worst happens.

What are the benefits of agreed value coverage?

Why choose agreed value? It gives you more control, less uncertainty and helps protect your investment:

• Payout predictability – You know in advance how much you’ll receive.
• No depreciation – Your payout won’t be reduced over time.
• Peace of mind – You’re covered if something unexpected happens.
• Tailored protection – It’s ideal for vehicles that fall outside conventional valuation ranges. For drivers of specialty vehicles, these benefits can outweigh the slightly higher premium typically associated with agreed value policies. Classic car insurance is usually more expensive than standard auto insurance due to the higher coverage levels required.

Agreed value policies guarantee a specific payout amount in the event of a total loss, unlike stated value policies where there is no assurance of receiving the claimed amount.

When would agreed value come into play?

Agreed value kicks in when your vehicle is declared a total loss. This usually happens in the most severe or irreversible scenarios:

• The vehicle is stolen and not recovered.
• It is severely damaged in a crash and repair costs exceed its value.
• A fire or flood destroys your car.

The date when the agreed-upon value is locked in is crucial, as it affects the policy period and makes sure that the value cannot be contested later.

In these cases, your insurance company won’t try to calculate current market value, they’ll pay the pre-agreed amount listed in your policy.

Market value vs. agreed value what’s the difference?

Standard policies use market value, which fluctuates with depreciation, mileage and supply/demand. The differences between market value and agreed value can significantly impact your payout, often resulting in a lower amount than expected.

Agreed value means you and your insurance carrier decide in advance what the vehicle is worth, and that number doesn’t change for the duration of the policy. Agreed value insurance gives policyholders a clearer understanding of their coverage level.

Value basis: Market pricing vs. pre-agreed amount

Depreciation: Applied vs. Not applied

Payout: Variable vs. Fixed and predictable

This gives owners more control and clarity in high-stakes situations.

How does an insurance company agree on the value?

To establish the agreed value, your insurance company may ask you to submit:

• A certified vehicle appraisal
• Multiple high-quality photos of your car’s interior and exterior
• Documentation of upgrades, restoration work or unique features
• Maintenance and mileage records

Insurance carriers use various resources, including auction results and specialists, to value older cars. An assessor will consider a vehicle’s classification and condition to determine its agreed value.

Once submitted and approved, the value becomes part of your policy terms. It may be reassessed at renewal if your car appreciates in value or you make modifications.

What documents or appraisals do you need?

Your insurance carrier needs proof of your vehicle’s condition and value before locking in an agreed amount. Be ready to provide:

• A recent professional appraisal from a qualified expert
• Interior and exterior photos showing the car’s condition
• Invoices for custom work, restorations or specialty parts
• Service history or maintenance logs

A statement of values is also crucial in determining the vehicle's worth for agreed value insurance. This document helps to make sure that the agreed-upon value accurately reflects the vehicle's true worth, influencing coverage amounts and premium calculations.

Good documentation makes sure that you get a fair, accurate valuation and makes the underwriting process smoother.

Understanding policy provisions

Policy provisions are the terms and conditions of an insurance policy that outline what is covered and what is not. These provisions are crucial as they define the scope of your coverage and your responsibilities as a policyholder.

Key provisions can include the maximum amount of coverage, the deductible and the coinsurance clause. The coinsurance clause, for example, requires you to pay a certain percentage of the insured value in the event of a loss. Understanding these details helps you know what to expect if you need to file a claim.

One key part of your policy may be an agreed value clause. That’s where you and your insurance carrier lock in what the car is worth. This is particularly beneficial for policyholders with unique or valuable items, such as classic cars or artwork. To support the agreed value, the insurance company will typically require documentation like appraisals or receipts.

Policy provisions can vary depending on the type of insurance policy and the insurance company. Therefore, it’s essential to carefully review and understand these provisions before purchasing an insurance policy to confirm that you have the right coverage for your needs and are fully aware of your policy’s terms and conditions.

Can you combine agreed value with other types of coverage?

Yes, agreed value can be part of a broader auto policy. It typically works alongside other types of insurance coverage, such as:

• Liability coverage for damage or injuries you cause
• Comprehensive and collision coverage for non-total losses
• Medical payments or personal injury protection (PIP)
• Uninsured/underinsured motorist coverage

Keep in mind:

• Agreed value applies only to total loss claims.
• For partial repairs, your standard policy and deductibles apply.
• Some insurance companies require your car be stored in a garage or driven infrequently. for agreed value insurance.

Does agreed value coverage change over time?

It can. The values of your vehicle may rise if it becomes more collectible, or if you make significant enhancements.

You should revisit the valuation with your insurance company at renewal especially if:

• Your vehicle’s market value changes
• You’ve added features or upgrades
• You’ve completed a restoration

Updating your documentation helps to make sure that you’re not underinsured if a claim arises.

Does agreed value cost extra?

Generally, yes. Because you’re locking in a higher payout with no depreciation, the premium is typically higher than a market value policy.

However, this cost includes:

• Certainty in your payout
• A custom valuation process
• Additional protection for unique vehicles

There may also be additional fees associated with obtaining agreed value coverage, such as appraisal costs to provide proof of value.

For classic or rare cars, many owners see this as a worthwhile investment to preserve their vehicle’s value.

How do I know if agreed value is right for me?

If your vehicle is unique, customized, or irreplaceable at market prices, agreed value is worth considering.

Vehicles that are eligible for agreed value coverage typically include classic, antique or highly customized cars that meet specific criteria set by insurance providers.

Ask yourself:

• Can I replace this car easily?
• Have I invested significantly in customization or restoration?
• Would a depreciated payout fall short?

If yes, talk to a licensed VIU by HUB Advisor to review your options. They’ll help you decide whether agreed value fits your needs—and how to make sure you’re fully protected.

FAQS:

What is better, agreed value or coinsurance?

Choosing between agreed value and coinsurance depends on your insurance priorities. Agreed value insurance locks in a fixed payout, offering certainty and full compensation without depreciation, ideal for high-value items like classic cars.

Conversely, coinsurance involves sharing the cost of a loss, potentially lowering premiums but leading to out-of-pocket expenses during claims. If you prioritize payout certainty, agreed value is preferable; if reducing premiums is your goal, coinsurance might suit you better.

What is the agreed value benefit?

The agreed value benefit makes sure that you receive a fixed payout for a total loss, eliminating depreciation concerns. It provides certainty and full compensation, making it ideal for high-value or unique vehicles like classic cars. This benefit offers peace of mind by guaranteeing that the policyholder receives the pre-determined amount, regardless of market fluctuations or the vehicle's age.