What Is Stated Value Car Insurance?

Definition & Examples of Stated Value Car Insurance

Man working on a classic car in his driveway while a small girl watches
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Stated value insurance is a common type of coverage available for classic cars or other rare items. It insures the item for a specified amount that is usually well below the actual value of the item.

Stated value insurance is a commonly misunderstood insurance coverage. It has an important purpose but is often misused. So if it is the coverage you are thinking of putting on your classic car, you had better know exactly how it works.

What Is Stated Value Insurance?

When it comes to the valuation of a vehicle, your primary concern is the possibility of an accident that results in a total loss. How much will your insurance carrier pay you for your classic car in case of such a claim? The answer can get lost in policy fine print.

The stated value determines how the insurance company rates your vehicle. In a sense, it's the value for which you can afford to insure your classic car—usually far less than it is worth.

Stated value insurance does not guarantee the insurance company will pay out that specific amount in a total loss. The policy will actually be worded so as to allow the insurance company to pay the stated value or the actual cash value (at the time of the accident), whichever is less.

How Stated Value Insurance Works

Stated value insurance is designed to help people who own a vehicle that is valued much higher than they can afford to insure. Insuring a $500,000 appraised vehicle your grandpa passed down to you would be a hefty cost. In that case, you could list its stated value at $60,000 so you still have affordable protection in case of minor damage. It is not as if you paid $500,000 out of pocket for the vehicle, and $60,000 is a reasonable value.

Ultimately, your stated value policy doesn't guarantee you that full $60,000 if you have a total loss. Your claims adjuster would still compare the stated value against the actual cost value to determine how much you would be paid. But at least you know you have some coverage if you need it.

Stated Value Insurance vs. Agreed Value

Stated value insurance is commonly confused with agreed value insurance, but the two are not the same. In an agreed value policy, you and your insurer will agree on the vehicle's value—usually at or at least close to what it's actually worth. In the event of a total loss, your policy will pay that amount no matter what. There is no "actual cash value" caveat as there is in a stated value policy. Depreciation won't even change the agreed value.

The agreed value policy is definitely the better option if you want maximum coverage, but it will cost you much more than a stated value policy.

Pros and Cons of Stated Value Car Insurance

Pros
  • Lower premiums

  • Available from most major insurers

  • Won't lose the entire value of the vehicle

Cons
  • Will not reimburse full value

  • Not a guaranteed amount

  • Can be confusing

Pros Explained

  • Lower premiums: It is a lower-cost car insurance coverage than an agreed value policy.
  • Available from most major insurers: Stated value car insurance can be added to your regular car insurance policy.
  • Won't lose the entire value of the vehicle: It will at least guarantee you get reimbursed for part of your loss.

Cons Explained

  • Will not reimburse full value: It does not cover 100% of the vehicle's value.
  • Not a guaranteed amount: It may pay less than the stated value if the actual cash value is lower than the stated value at the time of the accident.
  • Can be confusing: It can easily be confused with other types of coverage, such as agreed value, leaving you very upset at the time of a claim.

Stated value insurance is for reducing your cost not increasing your coverage. Keep this in mind when it comes to insuring your classic. Speak with a knowledgeable insurance agent to help you determine what coverage is right for you.

Key Takeaways

  • Stated value insurance is a type of coverage for collectible items that will cover the stated value or actual cash value at the time of total loss, whichever is lower.
  • It does not cover the full replacement value of the car or other valuable it insures.
  • Stated value insurance is much cheaper than agreed value insurance, which will cover the agreed value in a total loss, no matter what the actual cash value is.

Article Sources

  1. American Family Insurance. "Agreed Value vs. Stated Value: What’s the Difference?" Accessed Aug. 25, 2020.