A valuable difference: market value vs agreed value

Maureen arranged car insurance through her insurance broker believing that if the car was written off in an accident the insurer would pay her the agreed value of $10,000.  Following an accident Maureen was shocked to discover the insurer was only prepared to pay the car’s market value – $6,000.



Maureen complained her broker had not told her the insurer would only pay market value.  Maureen considered she had been over-insured, paying premiums based on a car value of $10,000.  Maureen wanted her broker to pay her either:

  • $4,000, being the difference between the amount Maureen expected her insurer would pay and the actual amount paid by the insurer or
  • the additional premiums she had paid to insure a car for $10,000.


Our review

Although Maureen genuinely believed her policy provided agreed value cover, all the letters and documentation referred to market value.  The most recent insurance renewal letter reminded Maureen to review the sum insured to make sure it reflected the current market value of her vehicle, and attached a summary from the insurer stating that the most the insurer would pay was either the repair costs or the market value if the vehicle was a total loss.

We did not think the broker had contributed to Maureen’s mistaken belief and recommended Maureen discontinue her complaint.

During our investigation we asked the broker to calculate the difference between insuring a car for $10,000 as opposed to $6,000. The difference was only $46 a year.



It is important to check your insurance provides the cover you are expecting.  Although your broker will help you through the process you still need to read the documentation to make sure your broker has arranged the cover you believed to be in place.

If you insure your car for market value, and do not want to pay more than you need to, we suggest you review the value of your car annually and adjust your cover accordingly.