Agreed Value Car Insurance: Everything You Need to Know

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  • Agreed Value Car Insurance: Everything You Need to Know

All cars aren’t created equal, and neither are car insurance policies. Insuring unique specialty cars can be nerve-wracking because they don’t have a universally accepted value. Agreed value car insurance might be a good solution for you if you own a classic car, a car with lots of custom modifications, or another high-value vehicle.

Read on to learn all about agreed value car insurance, how it works, and whether or not it’s right for you.

What Is Agreed Value Car Insurance?

Let’s start with the basics: What is an agreed value in insurance? It’s pretty self-explanatory. At the time you purchase an agreed value insurance policy, you and your insurer agree on a set amount that acts as the value of whatever property you’re insuring. When the time comes for you to make a claim, that value you agreed on is the maximum amount your insurance will pay out.  

Agreed value car insurance, also known as guaranteed value car insurance, can be beneficial if you’ve done work on your car that makes it worth more than the standard value of another vehicle of the same make and model. That might mean you’ve installed a built-in stereo system or fixed up an antique car with all new parts. 

Before an insurer will agree with you on your car’s value, you’ll probably have to have the car professionally appraised. Whatever value the appraiser sets would then be the agreed or guaranteed value in your insurance policy.  

Agreed value auto insurance guarantees your insurance company will pay what your car is worth if it’s declared a total loss after an accident – even with special aftermarket features or the additional value of a classic or collector car. You probably won’t get that kind of guarantee from a standard auto insurance policy. Because agreed value insurance offers more coverage, it costs more than a standard policy, too. 

Agreed Value vs. Stated Value Auto Insurance

They might sound like they should be pretty much the same thing, but agreed value and stated value auto insurance are different in important ways. 

With stated value auto insurance, you and your insurer still have to agree on a value for your car, but there’s no guarantee you’ll get that amount of money in the event of a total loss. Your insurer will pay out either the agreed value or your car’s actual cash value – whichever dollar amount is lower. 

In simple terms, your car’s actual cash value is what it would be worth in the current market, with depreciation factored in. So, with stated value auto insurance, you could end up getting a lot less money from your insurance company than you would with agreed value. 

Here’s an example of the difference between agreed value and stated value insurance:

Let’s say you fixed up your grandpa’s 1963 Corvette. New engine, new paint job, the whole nine yards. You get it appraised, and the value of the original car, plus the value of all the new parts and work you put in, is set at $100,000. So, you take out an insurance policy for $100,000. A few months later, you get in a wreck, and the car is totaled. 

If you have an agreed value policy, your insurer will pay you the full $100,000 you agreed on when you purchased your policy, even if the market value of the car has changed and the new parts have depreciated.

If you have a stated value policy, your insurance company will consider what the car would be worth today, not three months ago when you first fixed it up and insured it. Let’s say the market shifted, and a ‘63 Corvette isn’t worth as much as it was three months ago. And that new engine you installed isn’t new anymore, so it’s worth less, too. Now, the actual cash value of your car is $80,000, so your insurer will only give you $80,000. You’re out $20,000 worth of your time and money. 

You should definitely consider an agreed value insurance policy over stated value for custom or classic cars. Stated value insurance has lower rates, but you could end up losing a lot more than you save in the long run if your car is totaled. 

Can You Get Agreed Value Car Insurance for a Daily Driver?

You may be able to get agreed value coverage on the car you drive every day, but that depends on what kind of car it is and your insurance company. 

Most insurers that offer agreed value car insurance have restrictions on which cars are eligible. Some common eligibility requirements include: 

  • A minimum age of the car 
  • A mileage limit 
  • How often you drive the car 

Some insurance companies won’t allow agreed value insurance at all on a car you drive frequently, but others do. You’ll have to shop around to find an insurer that’s the right fit for your vehicle. 

Keep in mind that insuring a daily driver is always going to cost more than insuring a car you rarely drive because daily drivers are on the road a lot more and have a higher risk of getting in an accident

Does Agreed Value Depreciate?

No, it doesn’t. The main benefit of an agreed value policy is that it guarantees you’ll get the full amount you and your insurer agree your car is worth, regardless of depreciation. 

However, you’ll probably have to get the car re-appraised every time you renew your insurance policy. So, the agreed value on your policy next year might be less than it was this year. But once you sign the policy, you’re guaranteed the amount listed for the full term until it expires. 

You could also raise the agreed value on your insurance when it comes time to renew if you’ve added more modifications or otherwise increased the value of the car. 

How to Find Agreed Value Insurance Companies 

Agreed value insurance is rare, and most insurers don’t offer it. You may have to go through a specialty insurance company that exists specifically for modified and classic cars. 

Remember to watch out for policies that offer stated value coverage instead of agreed value. Many large insurance companies that don’t have agreed value insurance offer stated value as the next best thing, but you’d be just as well taking out a standard insurance policy that covers your car for its actual cash value.

While you’re shopping for an agreed value insurance policy, get as many quotes from as many different providers as possible. The value of insurance for custom and classic cars is just as tough to pin down as the value of the cars themselves. Rates can vary by hundreds of dollars between one insurance company and the next.

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The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.