Most people that own a Classic Car have a special connection to there car. So I feel it is important that they fully understand how the insurance they purchased is going to respond. Insurance policies come in many different forms, each designed to meet a specific set of needs. Two types of insurance that are often confused are Agreed Value Insurance and Stated Value Insurance. Although they may sound similar, there are key differences between these two types of coverage.
Agreed Value Insurance
Agreed Value Insurance is a type of policy that is commonly used to insure rare or vintage items, such as classic cars or rare art. In an Agreed Value policy, the insurer and the insured agree on the value of the item being insured. This agreed-upon value then becomes the basis for the policy coverage.
In the event of a loss, the insurer will pay out the agreed-upon value, regardless of the actual market value of the item at the time of the loss. This can be a significant advantage for owners of rare or vintage items, as the market value of these items can fluctuate widely. Agreed Value Insurance provides certainty and peace of mind that the full value of the item will be covered in the event of a loss.
Stated Value Insurance
Stated Value Insurance is another type of coverage that is often used to insure rare or vintage items. However, unlike Agreed Value Insurance, in a Stated Value policy, the insured declares the value of the item being insured. This declared value then becomes the basis for the policy coverage.
In the event of a loss, the insurer will pay out the lesser of the stated value or the actual market value of the item. This means that if the actual market value of the item is less than the stated value, the insured may not receive the full stated value in the event of a loss.
One advantage of Stated Value Insurance is that it is often less expensive than Agreed Value Insurance. However, it is important to note that the coverage provided by Stated Value Insurance may not be as comprehensive as Agreed Value Insurance.
Which type of insurance is right for you?
The choice between Agreed Value Insurance and Stated Value Insurance will depend on your individual needs and circumstances. If you own a rare or vintage item whose value is likely to fluctuate, Agreed Value Insurance may be the better choice. This will ensure that you receive the full value of the item in the event of a loss, regardless of market fluctuations.
On the other hand, if you are looking to insure an item whose value is more stable, Stated Value Insurance may be a more cost-effective option. It is important to carefully consider your options and to consult with a knowledgeable insurance professional to ensure that you have the right type and amount of coverage for your needs.
In conclusion, while Agreed Value Insurance and Stated Value Insurance may sound similar, there are important differences between these two types of coverage. Understanding these differences is crucial to ensuring that you have the right type and amount of insurance coverage for your valuable assets. Not sure how your car is covered currently? Give us a call to do a deep dive and make sure you have the Coverage you want. As a bonus, we can shop it through our multitude of carrier options.
Michael Vereecke, CLCS
President/Agent @ Customers First Insurance Group