Understanding Types of Car Insurance Coverage

Just as there are many types of cars, there are many different types of auto insurance policies, and many different ways to cover your car. For instance, most people don’t need to cover their “daily driver” car the same way they would cover their classic car or exotic auto. Let’s go over some different car insurance options together, so you go to bed smarter than you woke up this morning.

Usually, your every day car is covered by an actual cash value or “ACV” insurance policy. Most every day cars spend their lives both stuck in traffic and depreciating, so this is the most cost effective way to cover then on your insurance policy. ACV coverage means that you get paid the actual cash value of your car at the time of a loss. That means that you should reasonably be able to purchase another car of like kind should you have a claim. The one thing you should always consider is getting “gap” coverage if you are upside down on your auto loan. Lots of insurance companies offer it if you ask at time of purchase. Gap coverage covers the difference if you owe more than the ACV of your car.

The second type of coverage available to you is Stated Value coverage for your car. This type of policy allows you to tell the insurance company that your car is worth “X”, and then allows them to pay you up to that amount in the event of a loss. Yes, I said “up to”. That means that if the insurance company can make a case for paying you less than the value of your car, they will. We hear lots of people (and even some insurance agents) confuse stated value insurance with agreed value insurance – but in the simplest terms, and stated value policy just gives the insurance company a discussion point at claims time. It does not guarantee you the full value of your vehicle at the time of loss.

In order to guarantee the value of your vehicle at the time of loss, you must purchase an  “agreed value” insurance policy. Yes, you can get an agreed value policy on your daily driver car, if you choose to do so. However, the agreed value policy is usually intended for a collector car. Classic insurance., custom car insurance – even exotic car insurance is all written (or should be) on an agreed value insurance policy. Since agreed value policies are very specific in the coverage they offer, they are also very specific in their terms. Does your car qualify ? Are you interested in agreed value coverage? Then contact an insurance consultant today and discuss your needs.

See? Like I said, smarter than when you woke up this morning.