Since I have been in the insurance business I have come to realize that plenty of insurance agents abuse their position, either through ignorance or malice, and use incorrect terms to describe the coverage they are offering. It is important for you to be an educated consumer so you can make the right decision about what kind of policy you should choose for your vehicle. This article will focus on covering your property correctly; how you get paid in the event of a loss.
1. Actual Cash Value. (ACV) Actual Cash Value is the “standard” for auto insurance policies. In the event of a theft or a total loss, the insurance on your vehicle pays the actual cash value of your vehicle at the time of loss. The adjuster will look at your vehicle and examine blue book, look at dealerships, and also private party sales in your area. Generally the adjuster will average those three numbers, and that’s what the actual cash value of your car is. Obviously, this is not the way you want to cover your collector car, but for an every day vehicle it generally works out fine. The one exception to that “works out fine” part is if you are “upside down” on your car. If so, make sure you look for GAP or “loan/lease payoff” coverage. That covers the difference between what you owe on your vehicle and the actual cash value. GAP coverage can be quite expensive through the dealership, but it is often offered at a minimal cost as part of a regular auto policy through many insurance companies.
2. Stated Value Coverage. I’ll be honest with you; I don’t understand why insurance companies even offer stated value coverage. I know how it works, but I don’t see any real value in it. Stated Value coverage lets you tell the insurance company what your car is worth, but at the time of loss, they can pay the stated value OR the actual cash value – whichever is less. This is an ok proposition if your car is steadily appreciating in value, but even then you are getting paid the least the insurance company can find to pay for your car. Many agents will sell stated value policies to their classic car customers, but if you are paying for stated value, you might as well shop for an agreed value policy, and that’s next for us to talk about.
3. Agreed Value Insurance coverage. This is it – the top, the summit, the ne plus ultra way to cover your vehicle. If you can get an agreed value policy on your automobile, you certainly should. With an agreed value auto policy, you establish the value of your vehicle up front. That way, if you have a loss, you know exactly what you are going to get paid. Sometimes when this is offered, agents will insist on an appraisal for the vehicle. While an appraisal is worthwhile, it’s better to just work with an agent that understands car values and has some pre underwriting authority with the companies they are writing with. As an agency full of classic car insurance experts, the insurance companies know we are constantly on top of the collector vehicle market, and can help you make a wise decision about how to best to value your vehicle for insurance. I often hear from people I meet at car shows that they have “stated value” insurance, and that it’s “the same thing as Agreed Value coverage”. Trust me when I say that it is not, and if someone is telling you that it is, they are doing you a grave disservice. The only thing that is “like” agreed value coverage is agreed value coverage.
Hopefully, this has helped you to understand how your car is valued on your auto insurance policy. There is a wealth of misinformation out there, and here at The Phoenix Insurance we are all about education. The more you know about what you are purchasing, the more comfort you get from that purchase, and the less likely you are to make a bad insurance decision. You research every part of every car you build, right? I might argue that your insurance is the most important part of your build.
