What would you really get from your insurance company if your car was written off tomorrow? How much would you get if your house was robbed and some big ticket items stolen?
For motor vehicle insurance, market value is the most widely used basis of cover. To be honest, I rarely work with agreed value policies. Contents insurance normally is replacement value for most items, but in some cases such as clothing, its indemnity (or sometimes referred to as second hand or depreciated value).
But what is the difference between market value, agreed value, indemnity, depreciated value and so on….? Here’s my simple take on it.
Market value is the value that you would get for your car (or any asset for that matter) if you were to sell it tomorrow on the open market. It is not, and never will be, the full original purchase price or new for old.
Agreed value is just that. It is a realistic agreed value of the item you are insuring. For example, if your car is worth $10,000 and you insure it for that price, that’s what you will get. However it’s important to note that you will pay the premium to match.
It all sounds easy enough right? What about depreciated value or indemnity?
Depreciated value is the replacement value of the item, less an established depreciation amount (normally agreed between you and the insurer).
Indemnity is probably best seen as the second hand value. In my opinion, after years of dealing with this issue, the best way to understand indemnity value is to quote a very basic principal of insurance. That is:
“The principal of indemnity is to put you back in the same financial position you were before the loss”.
Please remember every insurance company has the right to replace, repair or indemnify when it comes to your loss. That is what they are there for. With market value, fair valuations are sought to establish the correct value at the time of the loss, and if you are not happy with it, you can gain another opinion too.
Are you insured for market value, indemnity or agreed value – and do you know what each one really means? Give me a call today for an obligation-free, cost-free chat to make sure your coverage is as it should be. After all, sadly, it is only when you need it, you realise your cover wasn’t what you thought. Don’t get stuck, give me a call.