You’ve seen the commercials and heard the taglines of insurance companies promising that they will take better care of you than the competition. You’re in good hands! They’re like a neighbor! The other guys will leave you driving three-quarters of a car! Amidst all the finger-pointing and self-praise, it can be difficult for consumers to decipher between the insurance they truly need and the fluff that will only serve to increase premiums with no real benefit.
The bottom line is that we all need auto insurance. Not only is it required by law, it just makes good sense to protect your investment and your assets should an accident occur. But, what about all those extras that some insurance companies are pushing at you? New care replacement sounds good. Better car replacement sounds, well, better. So, what does these terms really mean, are the policy add-ons worth the price, and how will they come into play should your vehicle be totaled? Let’s take a closer look.
Doesn’t Insurance Fully Replace My Totaled Car?
The amount that a driver will receive from their insurance provider after their vehicle has been totaled will depend on the actual cash value (ACV) of the car. This process involves proprietary software and comparison with like vehicles listed in your area, and unsurprisingly, the ACV as determined by insurance is rarely as high as drivers believe it should be. If you owe more on the vehicle than it is deemed to be worth, this means you could be left financially responsible for remaining payments on a totaled car. It’s a frustrating scenario and one on which insurance companies frequently capitalize in order to sell additional policy add-ons.
What Does New Car Replacement Mean?
Cars, particularly new cars, lose value quickly, making the above scenario a very real possibility. One of the available add-ons that many insurers provide to “protect” against this situation is new car replacement. In a nut shell, this coverage allows for the replacement of your totaled vehicle with a new one of the same make and model without decreasing your payout for depreciation. Not all insurance companies provide this option, but for those that do, it is typically only available for cars that are no older than one to two model years, and many place mileage limits on the coverage as well. Additionally, this coverage is going to result in increased premiums, although by how much is a factor dependent on the insurer.
What Does Better Car Replacement Mean?
Better car replacement is an option currently offered by only one insurance company. With this coverage, the insurer will replace a totaled vehicle of any model year with one that is at least one model year newer and with 15,000 fewer miles. Of course, it sounds like a great deal, but there is always a catch. In this case, the insured should note that the replacement vehicle will be in the same class and body type as the totaled vehicle, that their deductible still applies, and that this add-on is likely to increase premiums significantly. While the exact amount is unavailable, some estimates show this coverage increasing rates by as much as 40 percent, a hefty price to pay on the off-chance that your car is totaled when far less expensive options are available.
Are Car Replacement Add-Ons Worth it?
While some believe that these policy add-ons are worth their price tags, they aren’t right for everyone. Factors that should be considered are the overall rate increase, age of the vehicle, and any amount still owed to a lender. Additionally, drivers would be wise to consider all of their options and not just those being pushed by sales people or television commercials. Gap insurance is typically less expensive and covers the difference between actual cash value and the amount needed to pay off the vehicle. Likewise, policyholders should know that the value of their totaled car is negotiable and that the ACV first presented can nearly always increase with some research and smart negotiation tactics.
While dealing with insurance can certainly be a headache, don’t allow avoiding that aggravation to become a selling point for features you don’t need. While some policy add-ons make sense, there are many others that only serve to line the pockets of insurance providers. Conduct your own research before determining which policies to purchase and understand what the law requires of your insurer in the event of an accident. And, while we hope you never require our services, Medines Collision Center is always available after an accident to not only repair your vehicle to its best possible condition, but to help you navigate the daunting insurance claims process as well.