Is your car under-insured?

About this post

By Ross Lee.
21st May 2008

Non or under-insurance is a significant problem facing the Australian community. For example, according to the Australian Bureau of Statistics, around 23% of households do not have home or contents insurance. Unfortunately, many "insured" people found out the hard way in the Canberra bushfires and Cyclone Larry at Innisfail, that their insurance was not adequate at all - heartbreaking, to say the least.

For your car, there are commonly three options to set the sum insured: market value, agreed value or combination market / agreed value.

Market value is a recognised industry term for what your car would fetch on the open market, as is. It is not, say, the trade-in value, nor what an unusual purchaser would pay for your car.

Agreed value is that sum insured, fixed and agreed between insurer and insured for the car if it becomes a constructive total loss or in other words, is "written off". A suggested or maximum value may be provided by the insurer but you may be free to negotiate to some extent though.

There are also hybrids of market or agreed value options, so be careful to check - on what basis exactly is the policy is underwritten? For special vehicles, it’s probably better to seek independent insurance broker or legal advice.

As to vintage, classic or limited-edition cars, you may need to find a specialty insurer that is prepared to underwrite a policy on a basis where you feel comfortable.

In addition, you may have dealer-fitted or after-market accessories such as: window tinting, tow pack, alarm, alloy wheels and so on. It is best to individually list those on the policy with their respective values.

Also watch out for policy additional benefits such as full replacement of newer cars when written off, use of new parts in repairs, hire car and excess-lowering options.

Try using to compare your car insurance. This article was written by Ross Lee, insurance lawyer and General Manager of the Insurance Hub - a leading insurance information website for buying, claiming and dispute resolution on car insurance, home insurance, and small business insurance.

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