Agreed Value Insurance in Australia 2025: What You Need to Know

If you’ve ever insured a car, home, or prized asset, you’ve probably seen the term agreed value pop up in your policy options. In 2025, as insurance markets react to climate events, inflation, and shifting regulations, the question of how your payout is calculated has never been more relevant. Agreed value insurance isn’t just jargon—it could mean the difference between financial relief and disappointment when it matters most.

What Is Agreed Value, and Why Does It Matter?

In simple terms, agreed value insurance lets you and your insurer decide upfront what your asset is worth. This contrasts with “market value” policies, where the payout is based on what your asset is worth at the time of a claim—often subject to depreciation and market fluctuations.

• Agreed value: You and your insurer set the value in advance. If your car, home, or item is lost or destroyed, you receive this amount (minus any excess).
• Market value: The insurer pays what the asset would sell for at the time of the claim, which can be lower due to depreciation or market trends.

This distinction becomes crucial in a volatile market. For example, in 2023–2025, Australia’s used car prices spiked, then corrected, leaving some owners out of pocket if they had market value cover. Similarly, recent floods and bushfires have pushed up rebuilding costs for homes, which can leave market value home insurance holders short if costs rise sharply after a disaster.

2025 Policy Trends: What’s New for Agreed Value?

Several developments in 2025 are shaping how agreed value works for Australian consumers:

• Regulatory spotlight: The Australian Securities and Investments Commission (ASIC) has increased scrutiny on insurers to ensure transparency around agreed value policies, particularly for car and home insurance.
• Shorter validity periods: Some insurers now limit how long you can lock in an agreed value, often requiring annual revaluations to reflect changing market conditions and inflation.
• Premium increases: Due to inflation, supply chain issues, and a spike in natural disasters, agreed value premiums have risen for both vehicles and property in 2025. Policyholders are encouraged to review their cover regularly to avoid underinsurance.
• Digital assessments: Insurers are increasingly using digital tools—photos, online valuations, and AI—to streamline the agreed value setting process, especially for classic cars, art, and collectibles.

When Should You Choose Agreed Value?

Agreed value isn’t always the best (or most cost-effective) choice, but it can make sense in several scenarios:

• Specialty or classic cars: If you own a vintage vehicle or rare model, market value rarely reflects its true worth. Agreed value ensures you get what it’s really worth to enthusiasts.
• High-value or customised assets: Custom modifications, high-end audio, or renovations often aren’t factored into market value calculations. Agreed value can account for these extras.
• Volatile markets: In periods of sharp price swings (like the recent used car boom and subsequent correction), locking in a payout can offer peace of mind.
• Regional property risks: Homeowners in disaster-prone regions (Northern NSW, Far North Queensland) may benefit from an agreed value policy that covers rebuilding at current local costs, not last year’s averages.

However, keep in mind:

• Agreed value policies generally cost more than market value.
• Some assets may not qualify for agreed value cover unless independently valued.
• Underinsurance remains a risk if you don’t update the agreed value as prices change.

How to Get the Most from Your Agreed Value Policy

To ensure your policy delivers when you need it, follow these tips in 2025:

1. Review regularly: Update your agreed value at renewal to reflect changes in market prices, especially after renovations, upgrades, or major events.
2. Document everything: Keep detailed records—photos, receipts, independent valuations—especially for unique or modified assets.
3. Check policy limits: Some insurers cap the maximum agreed value or require extra documentation above certain thresholds.
4. Factor in inflation: With construction and replacement costs rising, consider an agreed value with a built-in inflation buffer or automatic adjustment feature.
5. Ask about payout conditions: Some policies only pay the full agreed value if the asset is a total loss. Partial claims may be settled differently.

With insurance, details matter—and in 2025’s unpredictable market, clarity and certainty are worth paying for.