Car insurance Tips and Traps (Part One)
Posted on 05 February, 2018
Ever wondered what you should look out for when purchasing a car insurance policy, or when making a claim? Check out the first part of our three-part series on common car insurance tips and traps.
Total Loss Claims
When you insure your car comprehensively, there are two options to consider when looking at what claim settlement you will receive in the event of total loss damage or theft, namely:
– Market Value or Agreed Value Claims.
Market Value policies cover the cash purchase price of a car of the same age, type, model and condition in your local area but excluding other costs. In determining the market value, the internet, newspapers and dealer guides may be used for reference purposes. Sometimes a car can depreciate in value more rapidly than usual due to lower popularity, resulting in the claimant’s disappointment with their settlement. The problem with market value policies is the uncertainty about the claim payout value.
Agreed value policies cover you for a fixed amount for which your car is insured for each period of insurance, regardless of any price change for your car during that period, guaranteeing your settlement payout. It includes the value of insured accessories and equipment. Agreed value is a better option because of its claim payout certainty but it often costs a little more in premium. Some insurers cover Agreed value automatically in their policy coverage.
New for Old Car Replacement
All Comprehensive car insurance policies these days cover the cost of replacing your car with an equivalent brand new one if it is a total loss, provided the car has not travelled more than a specified number of kilometres in the guarantee period. The replacement guarantee period varies from one to a maximum of four years, depending upon the insurers’ policy coverage conditions.
Clearly, this is an important consideration when choosing a policy if you have a recent model to insure because this benefit offers you a new for old cover instead of a depreciated total loss settlement.
Loan Interest Gap
If you arrange finance for the purchase of your car, the interest payable is calculated on the initial amount borrowed on a fixed repayment for the term of the loan. Sometimes there is more money owed to the financier for the outstanding loan amount than is claimable from the insurer; in the event of a Total loss of the car due to its rapid value depreciation.
To view policy comparisons for high profile insurance companies of the above-mentioned policy benefits, check out our guide to the insurance market!
*This is General Advice only – you should read and understand the Product Disclosure Statements and Policies for insurers that you are considering for the purchase of insurance to ensure it is right for you.
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