Claims
Custom car insurance: agreed value vs market value after a write-off
Custom car insurance explained: how agreed, market and stated value decide a write-off payout, what evidence to keep and how to challenge a low offer.
With custom car insurance, a write-off is paid out in one of two ways: at market value, which is what the car was worth just before the loss, or at an agreed value, which is a figure you and the insurer settled on when the cover started. Which one your policy uses decides whether your modifications are paid for, so it is worth knowing before you ever need to claim.
Agreed value vs market value vs stated value: what is the difference?
Most car policies pay market value. The Financial Ombudsman describes this as the price the vehicle would have sold for at a reputable dealership just before it was damaged or stolen. It is not what you paid, and it is not what you have spent on the car since.
Agreed value car insurance works differently. The insurer accepts a figure up front, usually after seeing evidence, and charges a premium based on it. The Ombudsman says that if a car insured this way is written off, the insurer should pay the amount agreed in the policy. It also notes these policies are not very common and are normally used for valuable or classic vehicles, and that cars with particularly high-quality accessories are often insured this way.
Stated value car insurance is the one that catches people out. You tell the insurer what you think the car is worth, but depending on the wording, that figure may only be the most they will pay, with the claim still settled at market value if that is lower. The Ombudsman's guidance to firms says an insurer should not limit a payout to what the customer said the car was worth unless this was made clear to them. So the exact policy wording matters.
| Basis | What a write-off pays | Main thing to check |
|---|---|---|
| Market value | What the car would have sold for just before the loss | Whether the insurer's valuation reflects your modifications |
| Agreed value | The figure agreed when cover started | That the agreed figure is up to date with the car as it is now |
| Stated value | Depends on the wording; your figure may only be a cap | Whether the wording treats your figure as a cap or a promise |
How is a modified car valued after a write-off?
On a market value policy, the insurer usually starts with trade valuation guides. The Ombudsman checks valuations against those guides, and where they give similar figures and the offer matches them, it is likely to agree with the insurer. Where the guides vary widely, it looks for other evidence such as adverts or an expert's opinion, and may tell the insurer to use either the highest guide value or a figure in line with the other evidence.
The Financial Conduct Authority looked at this in its March 2024 review of how insurers value written-off and stolen vehicles. It said firms should not generally rely on a single trade guide, that deductions must reflect the evidence and avoid blanket amounts or percentages, and that a firm's first offer should be its best estimate of market value rather than a low opening bid.
Why trade guides undervalue custom builds
Trade guides are generally geared to standard cars, so they are unlikely to reflect a rebuilt engine, a respray or a hand-made interior. The Ombudsman points out that guides often do not cover vehicles over 20 years old, unusual vehicles or conversions, and in those cases an engineer's report is used instead.
Even where a guide does list your model, modifications may not lift the figure. The Ombudsman says replacing an engine to keep a car roadworthy, or adding a satnav, has little effect on value, and that spoilers or racing exhausts may not raise the market value because they put some buyers off. It adds that a particularly high-quality accessory can sometimes increase value, but cars like that are often insured on an agreed value basis. If you import cars, there is a related point about deductions for imported vehicles in our guide to insurance for Japanese imports.
What evidence should a custom car owner keep?
Whichever basis you are insured on, evidence is what turns "my car was worth more" into a figure an insurer or the Ombudsman can accept. The Ombudsman lists the kind of material it may ask for, including independent engineer or expert reports with details of modifications, copies of valuations, vehicle history and closely matching adverts.
A practical file for a modified car looks like this:
- Receipts and invoices for every part and every job, showing the date, the supplier and what was fitted.
- Dated photos of the car from every side, the engine bay, the interior and close-ups of each modification. Take a fresh set after each change.
- An independent valuation from a specialist or engineer who knows the type of car, especially before setting an agreed value.
- The car's history: service records, MOT history, previous owners and any build sheet or dyno printout.
- Copies of what you told the insurer: your proposal or renewal answers listing the modifications, and the insurer's confirmation.
- Comparable adverts you spot over time for similar builds. The Ombudsman says adverts must closely match the car's specification, mileage and registration year to carry weight.
Keep copies somewhere other than the car itself, such as cloud storage or email, so they survive a theft or fire.
Does custom car insurance cover parts fitted after the value was agreed?
Not automatically. An agreed value is fixed at the point it is agreed. If you fit a new turbo or wheels a month later, the agreed figure does not rise on its own, and the new parts may sit outside it until the insurer has been told and the value reviewed. Policies usually require you to report changes to the car, so check the wording for how and when you must do this.
Telling the insurer also protects the claim itself. Under the Consumer Insurance (Disclosure and Representations) Act 2012, a consumer has a duty to take reasonable care not to make a misrepresentation to the insurer. Answering an insurer's questions about modifications wrongly can lead to a claim being reduced or refused. Our guide to car insurance for modified cars covers what to declare in more detail.
For example, if the car was agreed at £20,000 and you then spend £3,000 on new parts without telling the insurer, a write-off would normally still be settled against the £20,000 figure, and the undeclared change could cause a separate problem with the claim.
How is a write-off paid out, and what happens to the car?
Once the insurer decides the car is a total loss, it will make a settlement offer based on the policy's valuation basis. The FCA review found that most firms let customers substitute a new vehicle onto the policy for the remaining term, and that half of the firms reviewed deducted outstanding monthly instalments from the settlement, so ask how yours will be handled.
If the car is on hire purchase or PCP, the finance company owns it until the final payment, which can affect who the settlement goes to, so check with both the insurer and the lender. On the car itself, the Ombudsman says that once you accept a full market value payment the insurer usually owns the salvage. If you want to keep it, perhaps to recover parts, you can ask, and the insurer can deduct what it would have received for the salvage, though it must show evidence of that amount. The Ombudsman also considers it unfair to scrap a vehicle without telling the owner.
How do you challenge a total loss offer on a modified car?
The FCA expects firms to explain how they reached their figure and not to discourage you from challenging it. All the firms in its review allowed customers to submit more information in disputed cases.
- Ask for the breakdown. Request the guide values used, any deductions and the reason for each one.
- Check the details. Make sure the valuation uses the right vehicle details. The Ombudsman notes that differences in mileage or year of registration can have a big effect on value.
- Send your evidence. Receipts, photos, an independent engineer's report and closely matching adverts.
- Make a formal complaint if the offer does not change. The insurer has up to eight weeks to send a final response.
- Go to the Financial Ombudsman if you are unhappy with that response or it does not arrive in time. You must do this within six months of the date on the final response. The service is free.
If the Ombudsman finds a valuation unfair, it usually tells the insurer to increase it and may add interest; its guidance to firms refers to 8% interest on the extra amount, and where a car was scrapped without the owner's consent it may also ask the insurer to pay compensation for the distress or inconvenience caused.
On Kompare, you fill in one short form and a specialist FCA-authorised broker from the panel contacts you with quotes. That gives you the chance to ask directly whether a policy pays market, agreed or stated value, and how modifications are treated, before you buy.