Agreed value insurance isn't something you come across every day, but it's often used for classic cars or collector cars, where figuring out the market value is tricky. So, what exactly is agreed-value insurance, and how does it stand apart from other types of car insurance payouts? Let’s break it down.
Agreed-value insurance explained
Agreed value insurance, also known as "guaranteed value," is a type of car insurance where the insurer skips the usual co-insurance requirement. Before the policy kicks in, you’ll need to submit a statement of your car’s value or an appraisal to the insurance company. You may also know it as classic car insurance.
In simple terms, with agreed-value insurance, if you file a covered claim, the payout is based on the value you and your insurance company agreed on when you set up the policy. It’s as straightforward as that!
It's important to note that not every insurance company offers agreed-value coverage. You might need to seek out a specialty insurer or find an insurance broker that works with a specialty insurance partner.
How does agreed-value insurance work?
As we mentioned, agreed value insurance isn’t very common, but it's often used for classic, antique, or collectible cars that are likely to appreciate in value over time instead of depreciating.
With an agreed-value insurance policy, you and your insurer agree on the value of your vehicle, which sets the maximum payout in the event of a covered loss. If you file a claim, you’ll either get the full amount needed to repair the car or the pre-agreed value.
Getting agreed-value insurance is a bit different from the usual actual cash value (ACV) or stated value policies. As we said earlier, you’ll need to provide a statement justifying your car's worth.
What does agreed-value insurance cover?
Agreed value insurance, or classic or collector car insurance, offers the same basic types of coverages as a regular auto insurance policy, including:
Third-party liability
Third-party liability car insurance is there to protect others if you cause an accident. For example, if you’re driving your classic car and accidentally rear-ended the car in front of you, the third party can file a claim under your liability coverage to help pay for the repairs to their car. It can also cover legal and medical fees.
Accident benefits
Accident benefits coverage helps cover medical expenses if someone is injured in an accident. Whether you, as the policyholder, are injured or it’s someone else involved, this coverage can help pay for medical bills. It can also cover other costs, like lost income or funeral expenses, depending on the situation.
Uninsured motorist
Uninsured motorist coverage kicks in if you're driving your collector car and get into an accident with a driver who doesn't have insurance or is underinsured. It also covers you in hit-and-run situations where the driver can’t be identified later.
Direct compensation-property damage (DCPD)
DCPD coverage applies when you’re in an accident that isn’t your fault and your car gets damaged. With this coverage, your insurance company will pay you directly to help cover the cost of repairs, speeding up the claims process.
Collision coverage
Collision coverage is one of the first types of extra protection you might want to add to your classic car insurance. It helps cover the cost of repairs or even replaces your collector car if it's seriously damaged in an accident. Since classic cars are typically more expensive to repair or replace, collision coverage can be an essential coverage.
Comprehensive coverage
Comprehensive coverage is especially valuable for classic car owners, especially if you don’t drive your car year-round. When your car is in storage, like during the winter, you might assume it’s safe, but plenty of things can still go wrong. Your collector car could be stolen from the garage or damaged in a house fire. By adding comprehensive coverage, you’re protected from a wide range of risks, including theft, vandalism, fire, water damage, falling objects, explosions, riots, and other weather-related incidents.
Accident forgiveness coverage
Another popular optional coverage for collector car drivers is accident forgiveness. This add-on protects your driving record and helps keep your insurance premium from going up after your first at-fault accident. Since agreed-value coverage is typically already more expensive than standard car insurance, having this coverage can be really helpful.
How much does agreed-value insurance cost?
Premiums for agreed-value insurance are usually higher than those for an actual cash value (ACV) policy, but the actual cost will depend on several factors. Here’s what insurance companies consider when setting the cost to insure a classic or antique car:
- The age, make, trim, and model of your vehicle
- How often you drive your vehicle
- Where you store your vehicle
- Your driving record and experience
- Your age and location
- Any vehicle modifications or improvements
- Your claims history
- Your coverage requirements
- Your insurance history
How to get agreed-value car insurance
First, you'll need to research and find insurance companies that offer agreed-value policies. Remember, not all insurance providers offer it. Then, you'll want to request quotes from each insurer that you found who offers agreed-value coverage. Once you receive a quote you agree to, you can then complete the application either online or in person.
Your vehicle will likely need to meet certain criteria to qualify for classic or antique car insurance. For example, insurers often require the car to be a certain age, usually a few decades old, and in good condition. You'll likely need to submit photos or a statement of value.
An assessor will typically evaluate the car based on its classification and condition, especially its historical significance, like whether it’s vintage or antique. They also compare it to similar vehicles on the market, which can be tricky if your car is rare or unique—one more reason why agreed value insurance can be a better choice for these special vehicles. Once you've been approved for your classic car insurance policy, just pay your first premium to activate it.
Agreed value vs. actual cash value (ACV)
Actual cash value (ACV) is the standard payout method for most car insurance policies. It reflects your vehicle's value at the time of a loss, factoring in depreciation. When you buy a policy, your insurer calculates the ACV based on details like the car’s age, mileage, make, model, and other factors. While this value is mostly set by the insurer, you can ask for a reevaluation if you think your car is worth more.
The main advantage of an ACV policy is that it usually comes with lower premiums. However, the downside is that your payout will likely be lower compared to an agreed-value policy. For most everyday cars, ACV coverage is enough, but it may fall short if you have a classic or antique vehicle.
Agreed value vs. stated value
Agreed value and stated value might sound alike, but they’re actually quite different. With a stated value policy, you, the policyholder, decide how much your vehicle is worth. The insurance company will make sure your stated value is reasonable and may ask for proof, but unlike agreed value insurance, there’s no guarantee you’ll get the full stated amount if you file a claim.
Similar to agreed value policies, stated value policies are often used for classic, collector, or modified cars with higher value. The premiums are typically a bit lower than agreed-value insurance because the payout after a claim isn’t fixed and can vary.
Agreed value vs. replacement cost value
While they may sound similar, these two policies are not the same. With a replacement cost value policy, if you file a claim, you're compensated based on your vehicle’s original condition, without factoring in depreciation or any appreciation from upgrades or modifications. Unlike agreed-value coverage, where you and the insurer agree on the car’s worth, the insurance company sets the replacement value.
Who should get agreed-value car insurance?
Agreed value insurance isn’t for everyone, but it can be a great choice if you’re insuring a classic car, collector car, or a customized vehicle. One of the biggest advantages of agreed-value coverage is that it provides higher coverage since it doesn’t take depreciation into account, meaning you’ll likely get a bigger payout if you need to file a claim.
The downside is that agreed-value insurance typically has higher premiums because you’re paying for more coverage. So, if you’re looking to save on car insurance, this might not be the right policy for you. However, keep in mind that the larger payout can be worth it, especially if your vehicle would be expensive or hard to repair or replace.
Contact BrokerLink to learn more about car insurance
To learn more about agreed-value insurance, reach out to BrokerLink today. One of our licensed insurance advisors can walk you through how agreed-value insurance works and how it differs from standard car insurance. As a full-service brokerage, we can also provide you with a free quote for agreed-value insurance. Our quotes are accurate and reliable, and you can easily get one through our online quote tool on our website.
You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you.
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