Hey, Duane here! An obvious part of owning a car is insuring it. But traveling down the insurance road without a worthy copilot can lead to a false sense of security.
Auto Insurance Value
For years no one clarified that I had a choice in determining the insurance value of my vehicles. Most vehicles decrease in value over time through age and declining condition. That is what I primarily owned, and this is what most insurance companies insure, vehicles that depreciate.
ACV Actual Cash Value
Insuring automobiles that decline in value as they age, such vehicles are valued by insurance using the customary term ACV (Actual Cash Value). Accordingly, it is understood that the insured vehicle depreciates over time, and the present insurance value (ACV) of the vehicle is not identified unless an accident occurs.
Pausing here provides an opportune moment to mention GAP insurance. If you obtain a loan to purchase a vehicle that depreciates, learn about GAP insurance. It pays any shortage between the loan balance owed and the vehicle’s current value if totaled.
An accident is stressful enough. No one wants to learn that the insurance payoff is insufficient to fulfill the loan obligation. So, when considering that next vehicle purchase, ask about adding GAP insurance offered by your auto insurance or loan company.
Collector cars do not necessarily decline in value. Instead, their market value may rise, fall, or remain relatively constant, depending on several factors highlighted on AlluringAutos.com. Thus, for such enthusiast cars, a stated value could be assigned to the insurance policy.
The stated value might mirror the purchase price, or be assigned by you if agreeable by the insurance company, or be determined by an appraiser. This appraiser may be one you pay or one sent by the insurance company. Once the value is established, it helps determine the cost of the insurance and is stated on the policy.
Stated Value Misunderstanding
Over time, I transitioned to stated value policies for my older cars. Later I heard the term agreed value but did not investigate. I falsely assumed that stated value and agreed value were interchangeable terms. After all, I and the insurance company agreed to the value stated on the policy. Presumably that meant the stated value was the agreed value. WRONG!
I became one of many that falsely assumed the stated value would be the amount paid, before deductible, in the unfortunate event my vehicle was totaled. Alas, stated value provides no such assurance. Never having filed a claim on a vehicle with stated value, I have no firsthand experience on the process. But I do now know that stated value is a maximum amount or cap rather than a guarantee.
If you prefer a guaranteed value for the insured vehicle, then you need an agreed value policy rather than a stated value policy. Consider reading more on agreed value vs. stated value by clicking Insurance. It is a worthwhile 3-minute read on AlluringAutos.com. After all, no one wants to learn after an accident that their prized vehicle was not fully or properly insured.
For more information and qualified insurance advice, research online and ask specific questions of your insurance agent. Next Sunday, this blog returns to past cars owned, where in 2004 I purchased a car that no one expected me to drive. Thanks, and always drive with allure!
Alluring Autos does not sell insurance or offer insurance advice. Seek out insurance advisors, agents, and companies to assist your specific needs.