A quandary for classic car owners: Is it better to have agreed value or stated value insurance?
Generally, owning properties that are one-of-a-kind is an excellent thing. However, finding an insurance policy that perfectly suits that old, unique, or highly valuable property could get a little bit tricky. This is because some things usually find their ways at the peak of what many insurance firms offer. Two perfect examples of such things are classic cars and expensive pieces of jewelry.
There is nothing more exclusively pleasant than the feelings of driving a classic car or antique and navigating to different places for pleasure and luxury. This is one of the reasons why offering as much as possible protection to your ride should be one of your primary concerns. Of course, you may find yourself at the crossroads. What kind of insurance perfectly suit your classic vehicle and personal situation?
Depending on your preferred insurance policy, many of the auto insurance companies have a standard to insure your vehicle at the actual cash value. Essentially, this is based on this cost of the item while it is still new factoring in depreciation as well.
With this actual cash value of your item, there is a high probability that you won’t receive substantial compensation in order to replace the item fully. If you are looking at receiving a comprehensive reimbursement, you may be required to opt for insurance as a replacement cost value.
However, not all items are easily replaceable. This is where we need to talk about agreed value and states value insurance. With these two fundamental forms of auto insurance evaluation, it is possible to insure properties that have even been covered by standard policies.
While it is clear that these two policies differ in terms of what they offer, they are often confused for one another. What is an agreed value auto insurance? What is stated value insurance? Does any difference exist between the two terms? Which is best for you? Yes, this article seeks to shed more light on all these. Are you ready? Let’s get started:
What is Agreed Value Insurance?
Agreed value insurance, alternatively referred to as guaranteed value, is usually considered as the specific worth of a property as understood by you and your insurance company. Unlike many other insurance coverages, if you have covered your property based on an agreed value, there is a high probability that you’ll receive the full amount stated in the policy in cases of loss, accidents, and so forth.
Typically, this insurance coverage allows you to agree on a specified value of the property with your insurance company prior to the issuance of the policy. Before this, your property will be subjected to appraisal while your insurance company will ascertain the value. Usually, this is contained in your policy, and it will be clearly stated that the insurance company will cover the items at a guaranteed value.
With agreed insurance coverage, depreciation of the value of your property doesn’t matter at all. Even if depreciation is considered, it will still be out of the duration of the insurance policy. However, you’ll continuously undergo appraisals at the beginning of every new policy term.
Apart from modified and classic vehicles, pieces of jewelry are another popular option when it comes to agreed insurance value. For an additional premium option, you can include that highly valuable jewelry could be replaced at the specifically agreed cost, as listed in your insurance policy.
Agreed value insurance could be one of the unique approaches to vehicle insurance because it provides you with the opportunity to explain to your insurer the value of every needle you have put into the car as well as the reasons why the cost might be higher than similar vehicles.
Now that you have a grab on the concept of agreed value insurance, let’s proceed to understand the concept of stated value insurance.
Pros of Agreed Value Insurance
Agreed value insurance provides you with more substantial control over your expected payout regardless of the extent of the loss. By opting for an agreed value with your insurance company, you are at rest knowing fully well that you would be covered for the exact and predetermined amount of payout.
Cons of Agreed Value Insurance
When it comes to valuing your vehicle at agreed value insurance with your insurance company, there are a couple of drawbacks you should consider. Firstly, premiums tend to become more expensive, specifically in an event where your vehicle is totaled. With this type of insurance valuation, you’ll likely receive a higher amount than if you’d opted for stated value insurance policy.
Who Benefits Most from an Agreed Insurance Policy?
For policyholders who had just purchased a new vehicle recently or people who had recently installed special features or attachments that could make the vehicle highly valuable than when it is stock model, agreed value insurance is the best for you. Of course, it is a well-known fact that newer vehicles tend to depreciate more rapidly. So, if you are planning to replace your vehicle soon, you should consider agreeing on an amount that will give room for such.
What is Stated Value Insurance?
Commonly confused for agreed value, both agreed and stated value insurance varies considerably, specifically in the extent of their insurance coverage. Often used when it comes to providing insurance coverages for classic vehicles, stated insurance value of a vehicle is usually determined by the individual and not the insurance company. While it is generally required that you provide various documentation to back your claims on the stated value of your vehicle, you won’t necessarily receive the full amount from your insurance company in events of loss.
Of course, it is possible to value your classic vehicle at, for instance, $100,000 and even pay the corresponding stated value rate. However, you won’t be considered necessarily entitled to that full amount in cases where you suffer a loss of that particular vehicle.
In stated value insurance, your insurance company will only determine the market price of the car and make payments accordingly. If, for instance, your insurance company discovered that the vehicle is valued at $80,000, the payout you’ll receive will be substantially lesser than the stated value.
Typically, it will be indicated in your insurance policy that your insurance covers your property at a stated value or at an actual cash value, whichever is less. In some scenarios, your actual cash value might even be higher than the stated value. This implies that you can insure a vehicle at a price that is far less when compared to its actual worth. This, in turn, draws down your premiums as a result of this process.
However, in cases where you suffer a loss of the vehicle, you’ll only be entitled to the lowest of the two amounts.
Pros of Stated Value Insurance
Generally, stated value insurance has the benefits of offering lower premiums specifically for policyholders. This is because of the tendency of your stated value to be less than the valuation of your vehicle that will be agreed with your insurance company.
Cons of Stated Value Insurance
While the most important benefit of choosing this type of valuation is the lower premiums attached, with stated value insurance, there is usually a degree of uncertainty over your payout in scenarios where your vehicle becomes stolen or totaled.
As a comprehensive auto insurance policy, there is a high tendency that you’ll receive a substantial amount of payout, but this may end up being less when compared to the true value of the vehicle.
Apart from that, the payout might even be lesser than your expectation because the auto insurance company will value your car based on another vehicle of the same make and model similarly aged.
Who Benefits from Stated Value Insurance?
If you’d just purchased a vehicle that is fairly used, stated value insurance might be the best package for you. Of course, depreciation would have slowed down over a couple of years, and your payout would still be substantial enough for you to cover the costs of replacing your vehicle in cases where it was damaged or stolen.
Which is Better? Agreed or Stated Value Insurance?
Of course, you may find it challenging to get an agreed value coverage from every insurer. And yes, it usually involves unique or higher valued items. As such, you might require speaking with specialty insurance companies or a standard insurance company that partners with the specified ones.
If you have considered low premiums as the most critical factor for you, you should consider opting for stated value insurance. If, on the other hand, you are looking at insuring your items for their full value in order to avert the potential of a significant loss, agreed value insurance is probably going to remain the best option.