The major advantage of an agreed valuation insurance policy may be summed up as follows: if you have an accident and your car is written off, or your car is stolen and not recovered within a period of time, having an agreed value policy means that the settlement is pre-agreed. You know what you will receive in settlement and your insurance company knows what they have to pay.
The agreed value is the amount you will be paid in settlement, less your policy excess and the value of the salvage as agreed in your insurance policy or in discussion with the assessors.
As the classic car insurance broker Heritage puts it: “agreed value insurance means that the insurer has agreed the value of your vehicle and set it within your policy. Should a total loss of your vehicle occur, the value has been contractually agreed between you and the insurer.”
Calculating Agreed Insurance Values for Classic Cars
Several factors contribute to the agreed valuation of a particular classic car, including mileage, condition, provenance and recent investment in preservation and improvement.
To set the agreed value, most insurers ask for an independent valuation from an approved professional like me or from less experienced sources such as car clubs, and sometimes ask for a self-valuation form. The valuation request should be supported with photographs of the vehicle, including front, back, each side, the interior and the engine bay.
Most vehicle valuations fall within a range of prices. Cars that fall outside that range (usually higher, unsurprisingly) need to have something distinctive that sets them apart. If you believe that your car exceeds the usual range, the best way to get the valuation agreed is to present it to the valuer in a very good light, with excellent photographs and lots of detail on condition, history and provenance. this allows the valuer to aim for the highest values possible.
Market prices are important when it comes to agreeing a valuation and I gather a huge amount of price data to support the strongest valuations for my clients. Obviously there are times when a client wants more than I am happy to say: that is to be expected in what can often be a hugely subjective market. I regularly enjoy interesting discussions with clients on this topic but they always end amicably.
What if you have Market Value rather than Agreed Value Insurance?
In the event of a total loss claim, standard market value insurance policies pay out the market value of the vehicle at the time of the incident. This leaves your final settlement figure wide open to interpretation by insurance assessors. As experts in protecting their employer’s best interests, this can often lead to underpaying for total loss claims in more than a few cases.
The market value is affected by a number of factors, and the rarity of a vehicle is not always a consideration. The assessor will be looking for data that supports the lowest valuation possible and insurers love to point out that the £5k respray falls under maintenance rather than improvement and has no market value.
Do not run a classic car on a market value policy
The classic car and classic motorcycle markets are highly dynamic environments where values can go up and down several times in one season. Without an agreed value policy in place, there is a significant risk that a policyholder will lose out on the true value of their vehicle when it comes to a total loss claim.
In the event of a total loss claim, market value policies add a whole new level of stress to an already stressful situation, so why anyone would choose to run their classic on a market value policy is beyond me.
Again, note what classic car specialist insurer Heritage has to say: “Classic cars are particularly at risk without an agreed value policy. Rarity, heritage and pedigree contribute to the value of a classic car, but in the event of a write-off an engineer only looks at the cost of replacing the metal. For example, a Jaguar E-type that was well known for winning races cannot have its heritage replaced, but is worth more to a buyer than an average E-type. The engineer will only see the value of the car as if replacing it with another similar age, condition, and colour E-type.”
Increasing the agreed value mid-policy
If new data comes to light which suggests your classic car may be undervalued for insurance, your agreed insurance value can be changed mid-term. Policyholders should inform their insurance companies as soon as possible if your value needs to be increased. If one is restoring or regularly making modifications or upgrades to a classic car, the agreed valuation should be maintained at the correct level throughout the policy.
Most insurers do not charge for agreed value as the process of adding this cover to your policy is simple and insurers prefer to agree values in advance. Claims on classic car policies are traditionally low, but you just never know what is going to happen.