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Understanding Settlement Methods

When insuring your trailer, one of the most important decisions you'll make is how to establish its value for insurance purposes. There are two main approaches: agreed value cover and market value cover. Each has advantages and disadvantages, and the right choice depends on your specific situation.

This decision affects your premium, how quickly claims settle, and most importantly, what you'll receive if your trailer is declared a total loss. Understanding both options helps you choose the approach that gives you the best protection and peace of mind.

What is Agreed Value Cover?

With agreed value insurance, you and your insurance company mutually agree on the replacement value of your trailer before any loss occurs. This value is documented in your policy and becomes the fixed amount you'll receive if your trailer is deemed a total loss.

To establish agreed value, you typically provide:

• A professional valuation from an approved valuer
• Recent purchase receipts and documentation
• Photographs of the trailer showing its condition
• Service records demonstrating maintenance
• Details of any recent repairs or upgrades

Once agreed, this value is locked in for the duration of your policy (usually annual). If your trailer suffers a total loss, you'll receive this agreed value amount (minus your excess) regardless of what the trailer might sell for in the current market. This provides certainty and often results in faster claim settlements.

What is Market Value Cover?

Market value cover settles claims based on what your trailer would actually sell for in the open market at the time of loss. There's no predetermined value — the settlement amount is determined after you make a claim.

With market value cover, when you claim for a total loss, your insurer will assess the current market value of your trailer by considering factors such as:

• The trailer's age and make/model
• Actual condition at time of loss
• Comparable sales of similar trailers
• Current market prices for your trailer type
• Mileage and usage history

Market value cover is simpler to arrange initially — no expensive valuation required. However, settlements can take longer while the insurer determines fair market value, and you might receive less than you expected.

Agreed Value vs Market Value: Key Differences

When Should You Choose Agreed Value?

Agreed value cover is particularly valuable for:

Classic and Vintage Caravans

Older caravans that are well-maintained can have values that don't follow typical depreciation curves. A 1970s vintage caravan in excellent condition might be worth more to enthusiasts than "market value" calculations suggest. Agreed value ensures you get fair compensation for a unique asset.

Specialised Horse Floats

Quality horse floats can be expensive and highly specialised. Market value can be difficult to establish for these niche vehicles. An agreed value protects your investment by fixing the replacement cost upfront.

Heavily Customised Trailers

If you've invested significantly in customizations, upgrades, or built-in equipment, market value might not account for these improvements. Agreed value allows you to include the value of custom work.

Trailers with Valuable Contents

If your trailer carries high-value equipment or contains expensive built-in appliances, agreed value ensures the full trailer value (including fitted equipment) is protected.

Well-Maintained Older Models

An older trailer that's been exceptionally well-maintained might be worth more than depreciating market value suggests. Agreed value locks in fair value for condition.

When is Market Value Sufficient?

Market value cover is often appropriate for:

• New caravans: New models hold closer to market value, making assessment straightforward
• Standard trailers: Box trailers, flatbeds, and other common trailers with established market values
• Budget trailers: Lower-cost trailers where valuation costs might exceed the difference in settlement
• Frequently replaced vehicles: If you plan to replace your trailer within a few years
• Cost-conscious buyers: Those prioritizing lower premiums over settlement certainty

The Claims Process Difference

Agreed Value Claims

With agreed value, the claims process is streamlined. You report the loss, provide proof of ownership and insurance, and the insurer settles based on the pre-agreed value. Since the value is documented in your policy, there's little room for dispute. Most agreed value claims settle within 2-4 weeks.

Market Value Claims

With market value claims, after proving your loss, the insurer will assess the market value. They may request independent valuations, check comparable sales, and sometimes negotiate with you about the settlement amount. This process can take 4-8 weeks or longer if there's disagreement about market value.

Cost Comparison

Agreed value cover typically costs 5-15% more than market value cover. This premium reflects:

• The cost of professional valuation
• Reduced uncertainty and claims complexity for the insurer
• Faster claim settlements
• Greater certainty of the exact amount you'll receive

For example, if market value cover costs $400 annually, agreed value on the same trailer might cost $440-$460. For valuable trailers, this small premium difference can mean a $3,000-$5,000 difference in your claim settlement.

Getting an Agreed Value

If you decide agreed value is right for you, the process involves:

1. Professional valuation: Hire an approved valuer to assess your trailer's condition and fair replacement value. Costs range from $150-$400.
2. Obtain valuation report: Provide this to your insurer as proof of the trailer's value.
3. Policy documentation: The agreed value is documented in your insurance policy.
4. Annual review: Some insurers recommend revaluing every 3-5 years, especially if significant work is done.

Depreciation Considerations

An important consideration with agreed value is whether you want it to depreciate annually or remain static. Some policies allow "diminishing agreed value" where the agreed amount decreases each year (accounting for normal depreciation). Others keep the agreed value static throughout the policy term.

Discuss this with your insurer when setting up agreed value cover. For newer trailers, diminishing agreed value might be appropriate. For older or classic trailers, static agreed value better protects your investment.