Agreed Value vs Market Value

You may have  noticed in some of our quotation that the proposed sum insured are stated as Agreed Value.  While there are time it is based on Market Value.  So, what actually is the difference between Agreed Value and Market Value?  And which value should you insured your vehicle for?

Our recommendation would be insuring your vehicle based on Agreed Value.  Agreed Value is the sum insured amount agreed by the Insurance Company (in this Case, Allianz General) for your vehicle based on your vehicle’s age and model.  Allianz has a comprehensive motor vehicle database for common vehicle in determining the Agreed Value.  Insuring your vehicle based on Agreed Value will eliminate the risk of under or over-insuring your vehicle.  In the event of a claim, your sum coverage will not be questioned and Allianz will payout accordingly to your policy, as it is an Agreed Value.

If you insured your vehicle based on Market Value, in the event of a claim, your insurer will pay out according to your vehicle market value at the time prior to the accident.  Assuming you insured your vehicle for RM80,000 and after 9 months, your vehicle’s market value could have reduced to RM72,000.  Thus, in the event of a total loss or thief, the insurance company would compensate you RM72,000 and not RM80,000.

If you insured your vehicle based on the Agreed Value provided, example RM80,000. In the event of a claim, Allianz will pay out based on RM80,000 as it has been agreed upon.

As market value for your vehicle may be difference based on different sources, thus, there could be a risk of under-insuring.  You may think that your vehicle is worth RM30,000 and thus insured for RM30,000.  But, the insurance company may value your vehicle at RM40,000.  Thus, in the event of a claim, you are actually under-insured by 25%.  This will affect your claim payout, as the payout will be reduced by 25% proportionately.

Thus, it is advisable to insure your vehicle with an Insurance Company that has Agreed Value system.  Allianz is among the first insurance company to implement Agree Value coverage.