Market Value vs Agreed Value 2023: Which One Is Better?

You may be familiar with terms like sum insured, market value vs agreed value when determining the insured amount for your car insurance protection. It is important for you to understand these matters, especially when renewing comprehensive car insurance. The choice between agreed value and market value will affect the amount of compensation you receive when making insurance claims in the future.

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Sum Insured in Malaysia: Choosing Market Value vs Agreed Value for Your Car Insurance Policy

Before renewing your car insurance and road tax, you need to choose the right sum insured to ensure adequate protection for your vehicle. Pay attention to sum insured meaning, what is market value vs agreed value, and understand the differences between market value vs agreed value to help you make an informed decision.

Sum Insured

It is important for you to choose the appropriate sum insured for your car protection. But what does sum insured mean?In simple terms, sum insured refers to the insured amount for your car, which is determined based on its current market value.

The sum insured for your car will decrease each year, usually influenced by depreciation. By selecting the right level of coverage, you can avoid situations where your car is over-insured or under-insured, ensuring adequate protection for your vehicle.

Under Insurance

If your car is under-insured (or under insurance), you will not receive full compensation for the loss or damage to your vehicle. In the event of an accident, you may not receive full reimbursement from the insurance company. Additionally, you may:

- Have to pay out of pocket to cover the repair costs of your car (in the case of an accident);
- Not receive full compensation (in cases of car theft or total loss due to fire or accidents).

Over Insurance

However, if the coverage exceeds the market value of your car (over insured), you will have to pay higher and excessive insurance premiums.

In the event of any incident involving your car, the compensation amount you will receive will be limited to the current market value of your vehicle.

In essence, sum insured is divided into two options – market value vs agreed value. You can choose either of these options depending on your needs and budget.

Market Value

Market Value refers to the insured amount of a vehicle based on its current market price at the time of purchasing insurance. The determination of this value is typically influenced by factors such as the brand, model, and year of manufacture of the vehicle.

To help you better understand Market Value, consider the following example:

The current market value of Ahmad’s car was RM50,000 when he purchased car insurance last year;
He chose to insure his car based on the Market Value with a coverage amount of RM50,000;
Recently, his car was involved in an accident, and he filed a total loss claim with the insurance company;
If his claim is approved, the insurance company will compensate him based on the market price at the time of the claim;
Let’s say the market price for the same car model is RM45,000 – the insurance company will pay compensation according to that current value;
In other words, the amount paid by the insurance company depends on the market value of the car at the time of the insurance claim;
Assuming the car is still under loan, and Ahmad still has an outstanding balance of RM47,000 with the bank, he will need to add RM2,000 from his own savings to settle the car loan.

The example provided is for illustrative purposes only – the actual situation or costs involved may vary depending on the policy and individual circumstances.

Agreed Value

Agreed Value means that your car is insured based on a value that has been agreed upon between you and the insurance company. The insured amount offered is calculated based on the car model, year, and other factors at the time of purchasing insurance.

In the event of loss or total loss claim, the insurance company will pay you full compensation according to the agreed value. This coverage amount will not change even if the market value of your car has depreciated.

To help you better understand Agreed Value, consider the following example:

Suraya chose to insure her car for RM50,000 based on the Agreed Value;
After eight months, she was involved in a severe accident that caused extensive damage to her car;
She filed a total loss claim with the insurance company, and they will pay her RM50,000 based on the agreed value at the time of insurance purchase;
The compensation amount received remains unchanged, even if the value of Suraya’s car has depreciated at the time of the accident;
Let’s say Suraya still has an outstanding car loan balance of RM45,000 with the bank. She can use the received compensation to settle the debt with the bank;
The remaining RM5,000 can be used for savings, investments, or other purposes.

The example provided is for illustrative purposes only – the actual situation or costs involved may vary depending on the policy and individual circumstances.

Is Agreed Value Better than Market Value?

To answer the question of which is better between market value vs agreed value, it entirely depends on individual preferences. However, you can consider the following factors when determining the insured amount for your car:

	Advantages	Disadvantages
Market Value	The insurance premiums may be lower, depending on your insurance policy.	The compensation payment may be lower than the insured amount due to vehicle depreciation; Risk of under-insurance.
Agreed Value	The compensation payment is equal to the insured amount without being influenced by the market value; You can accurately know the amount of compensation that will be received.	It may not be available for all insurance plans; The premium price may be higher depending on your insurance provider.

In essence, an Agreed Value policy allows you to receive adequate compensation, eliminating concerns about depreciation or under-insurance. On the other hand, a Market Value policy enables you to save money with lower premiums if the insured amount is lower.

Market Value vs Agreed Value: What is Best for Your Car Protection?

Both market value vs agreed value have their own advantages and disadvantages. It entirely depends on an individual’s needs. What’s important is to understand the differences between these two policies to make the right and appropriate choice.

Typically, most new car owners opt for Agreed Value. In the event of theft or total loss, it offers better payment amounts, even though it involves slightly higher premiums. However, if you are unable to choose between market value vs agreed value , you can consult with Qoala’s customer service for further information.

Qoala is a comparison and insurance renewal platform that helps you choose the best car insurance that fits your budget, needs, and suitable protection. Get a free quote today and make a choice between market value vs agreed value for your car today!