Agreed Value vs Market Value: Why It Matters for HGV Insurance

When a truck is written off, the insurance settlement can make or break an operator's ability to replace the vehicle and keep the business running. The choice between agreed value and market value insurance is the single most important decision in your motor vehicle policy — and it is one that many operators do not fully understand until it is too late.

The gap between agreed value and market value settlements can be $50,000–$150,000 on a modern HGV. For an owner-operator, that gap comes out of personal savings, a bank loan, or — worst case — the business simply does not survive the loss.

What is agreed value?

Agreed value means the insured amount is locked in at policy inception. You and the insurer agree upfront on the value of the vehicle, and that amount is recorded in the policy schedule. If the vehicle is a total loss, the insurer pays that agreed amount, less any applicable excess.

There is no argument about depreciation. No assessor determining what the market would have paid for a three-year-old Scania with 400,000 km on the clock. You know exactly what you will receive — and you can plan accordingly.

Agreed value is particularly important for HGVs because these vehicles depreciate in non-linear ways. A logging truck body, a purpose-built tanker, a livestock deck — these components hold value differently from the underlying cab and chassis, and replacement costs are driven by current manufacturing and freight costs rather than age alone.

What is market value?

Market value means the insurer assesses the vehicle's value at the time of the claim — using depreciation schedules, trade guides, and market analysis. The settlement is what the vehicle was worth just before it was damaged, not what it cost to buy or what it costs to replace.

The practical problem is illustrated with a real example. A 2020 Kenworth T909 purchased for $380,000. Three years later it carries a book value of $220,000 and a market value assessment of $195,000 — but a comparable replacement unit from a dealer currently costs $310,000. The operator receives $195,000 and must find $115,000 to replace the vehicle.

A further complication: the market value assessment is conducted by an assessor engaged by the insurer. The assessor uses trade guides and recent sales data. If the market has moved quickly (as it did in 2022–2024 when supply constraints pushed used truck prices up sharply), the guide values may lag current market conditions. You may receive a settlement that genuinely does not buy a comparable replacement.

The current market reality: why agreed value matters more than ever

The post-Covid supply chain disruption has created a specific challenge in the HGV market. New European trucks (Scania, DAF, MAN, Volvo, Mercedes) currently have lead times of 12–18 months from order to delivery in this country. New Japanese trucks (Hino, Isuzu, UD) are more available but facing their own supply pressures.

The result is that the replacement cost of a used truck in good condition has been elevated well above what depreciation schedules suggest. An operator who insures on market value may receive a settlement that buys a used truck at market rates — but finding a comparable used unit in acceptable condition at that price is much harder than before 2020.

Agreed value at current replacement cost eliminates this problem. The insurer pays what it costs to replace the vehicle in the current market. The operator is restored to their pre-loss position.

A real-world NZ example: the settlement gap in practice

Consider two operators running identical 2021 Scania R580s, both purchased at $340,000. Operator A insures on agreed value at $280,000 (reflecting current replacement cost after dealer consultation). Operator B insures on market value.

Two years later, both trucks are written off in separate incidents.

Operator A receives $280,000 (agreed value) less a $5,000 excess = $275,000. They use this to buy a comparable used Scania from their dealer for $270,000 and continue operating with minimal disruption.

Operator B's insurer assesses market value at $210,000, using trade guide data. The settlement is $210,000 less a $5,000 excess = $205,000. A comparable used Scania now costs $265,000. Operator B is $60,000 short. They have to arrange additional finance, which adds to monthly costs, or buy a lower-specification replacement.

The agreed value premium for Operator A was approximately $400–$700 per year more than Operator B's market value policy. Over two years, that is $800–$1,400 more in premium. The settlement advantage was $70,000. The return on the additional premium is overwhelming.

Depreciation schedules and how they work against operators

Standard insurance depreciation schedules for HGVs typically work on a straight-line basis: a new truck depreciates by a fixed percentage per year, regardless of actual market conditions. Typical rates run at 12–18% per year for standard rigids and artics, and slightly less for purpose-built specialist bodies.

On a $350,000 truck depreciating at 15% per year, the book value after three years is approximately $215,000. The market value assessment may use this figure or a close proxy — regardless of what comparable units are actually selling for in the current market.

For specialist vehicles where the body is a significant part of the value (logging bodies, tanker bodies, livestock decks, refrigeration units), standard depreciation schedules applied to the whole vehicle may significantly undervalue the specialist components. A ten-year-old logging jinker body in good working order has a replacement value that straight-line depreciation does not capture.

How to set the right agreed value

Setting the agreed value correctly requires understanding current replacement costs for your specific make, model, specification, and mileage level. Use three sources.

First, get a written replacement cost quote from your dealer or preferred supplier for your specific vehicle specification. This is the most reliable basis for agreed value — it is what it would cost to put a comparable truck back in your yard today.

Second, check trade price guides. Glass's Commercial Vehicle Guide provides benchmark valuations. These lag current market conditions and do not capture supply constraint premiums, so treat them as a floor rather than a target.

Third, ask your specialist broker. A broker with an active HGV book has current market intelligence from placement activity across multiple operators and can advise on appropriate agreed value for your specific vehicle.

Review the agreed value annually at renewal. If vehicle values have increased — as they did significantly in 2022–2024 — your agreed value needs to increase to keep pace. A vehicle insured at $200,000 agreed value two years ago may need $260,000 agreed value today to properly cover replacement cost.

The cost difference

Agreed value policies are typically priced at a modest premium over market value — usually 5%–15% more on the motor vehicle component. On a vehicle with a $300,000 agreed value, this might be $300–$600 more in annual premium. Given the potential settlement gap (potentially $50,000–$150,000 on a modern HGV), the additional premium is almost always justified.

For specialist vehicles — logging trucks, tankers, refrigerated units, livestock carriers — where the body and equipment are a significant part of the total value, the agreed value premium loading is particularly justified. A tanker body with $120,000 of specialist valving and compartment configuration needs to be specifically valued, not lumped into a standard depreciation schedule for the whole vehicle.

The verdict

For any working HGV — particularly late-model units, specialist vehicles, and owner-operated trucks where the vehicle is the whole business — agreed value is essential. Do not insure on market value. The premium difference is modest; the protection difference at total loss is enormous.

If your current policy is on market value, ask your broker to switch to agreed value at the next renewal. And get a current replacement cost quote from your dealer to set the agreed value correctly. This single change may be the most important improvement you make to your insurance programme this year.