What is market value in car insurance?

Market value in plain English

Market value is roughly what it would have cost to buy a car like yours, in the same condition, just before it was damaged or stolen.

AFCA describes market value as: "The average value of vehicles of a similar make and model, taking into account the age and condition of the vehicle." AFCA, the Australian Financial Complaints Authority, also notes that the term is usually defined in the insurer's own policy, so the policy wording is the place to check first.

What changes a car's market value

Two cars of the same model can have quite different market values. The details that usually matter most are:

• The exact year, make, model and variant (an SR5 and an SR are priced differently)
• Kilometres: fewer kilometres usually means a higher value
• Condition before the loss
• Accessories fitted to the car, valued at what they're worth today
• Where the car is: prices differ between states

Market value isn't what you paid

Cars lose value over time, so market value is usually less than the purchase price. It also isn't a trade-in price, which tends to be lower than buying privately or from a dealer.

Market value is usually the figure before any deductions, such as the excess. What's taken off or added in a settlement depends on your policy, so check it against your insurer's settlement letter.

Where the insurer's figure comes from

Insurers commonly use valuation guides and tools, and may look at cars advertised for sale. You can ask your insurer for a copy of the valuation they relied on, which shows exactly which car they valued and how.

Is market value the same as what I paid for my car?

No. Market value is what the car was worth just before the loss. Cars usually lose value over time, so it's often less than the purchase price.

Where is market value defined?

Usually in your insurance policy. AFCA's published approach also describes it as the average value of vehicles of a similar make and model, taking into account age and condition.

Does market value include the excess?

Market value is usually the figure before any deductions, such as the excess. Check your policy and settlement letter for what's deducted or added.