What valuation of the vehicle do insurers make after a total loss
If we look at the car policy we can see that many of the coverages included refer to the market value of the car or the value as new . On other occasions, we speak of replacement or market value. Do you know how your insurer is going to value the car in a total loss ? The answer is described in the policy, but it will help you to know what the Insurance takes into account when valuing the vehicle after an accident.
Who more and who less have a special affection for their car, either because it is our preferred means of transport, because it makes our work easier and represents the best ally of family leisure. Every driver knows better than anyone the value of his car to theirs, but we may not have noticed how Insurance values our car . And it is important.
At the time you buy a vehicle it is easy to give a figure. Your best reference is the price you paid for your car at the dealer, although that value lasts for a very short time. In fact, in the same dealership a new car can lose 10% of its value or more just because it is registered and becomes a zero kilometer .
In addition, the passage of time and use significantly reduce the value of a vehicle. That is why the price of new cars are very different from used, semi-new or second-hand cars.
The importance of valuing a car after an accident
Car insurers also take this depreciation into account when valuing a damaged car. In the coverage for loss of the vehicle or when you have an all-risk insurance that covers your own blows , the valuation of the vehicle is key when determining if, in order to comply with the contracted coverage, the repair of the car or an indemnity that compensates the vehicle loss.
This is because a clause may be included in the Insurance conditions that enables the company to declare the car a total loss if the cost of the repair exceeds the value it gives to the vehicle.
In the event that the damaged vehicle is not the culprit of the accident, things change, since when the culprit is the opposite vehicle, the other party has the right to claim that their car be repaired.
Be that as it may, if unfortunately an accident leaves the car for scrapping or it suffers a devastating fire or it is stolen from us and it does not appear, that is when the user is affected by the way their insurer values the car. That is why it is so important to know the valuation of the vehicle that the Insurance can make us.
Valuing a vehicle in a total loss
In general, the value that the insurer gives to a car after a total loss is calculated based on the age of the vehicle at the time of the accident, mainly.
The details of the valuation of the vehicle in an accident are established in the conditions of the contract, although insurers generally apply the following valuations to the car, depending on the circumstances:
- The value to new
- the market value
- The replacement or market value
- Enhanced Market Value
The new value in Insurance
When the Automobile Insurance applies the value to new in the calculation of the compensation after a total loss , it is valuing the vehicle for an amount equal to the cost of a new car with the same characteristics and including all taxes (VAT and tax of registration).
In addition, if we have declared in the policy the accessories of the car that are not standard or they are included in the policy, they will also be included in the compensation in case of loss of the vehicle.
If the car in question is no longer manufactured, the Insurance must compensate for the amount corresponding to the equivalent model that replaces it. In addition, this payment can be made in cash or with a new car.
The market value of the car for the insurer
The insurer applies the market value to a car that is a total loss in an accident, when it occurs after a period from its registration that is established in the policy.
When valuing the car with the market value , the Insurance applies the sales value of a vehicle with the same characteristics and age, at the time of the accident. We are talking about model and year, regardless of other aspects such as mileage or vehicle maintenance.
In this case, non-standard accessories are also included if they were described in the policy. There is also an improved market value, in which some insurers increase the market value of the car by a percentage in their compensation.
To calculate the market value of the car , it is normal for the insurance company to take as a reference some tables that are published each year in the BOE with the valuation of hundreds of more or less old car models. These tables collect the value in euros of the vehicles, according to cylinder capacity, year, horsepower, etc.
The replacement value or commercial value of the vehicle
In this case, the purchase price of a car with the same characteristics and age as the damaged car is applied. As in the market value, it does not matter how many kilometers it has or if the car is more or less well cared for, and non-series accessories can be included if they are included in the policy.
Difference between market value and replacement value
The difference between market value and replacement value is important. What a car is worth for sale is not the same as the purchase price of the same car, although it may seem like a simple play on words.
In fact, the difference between one price and another can be between 20% and 30%, since the replacement value includes transfer costs, repairs and the seller’s profit.
The improved market value of some Insurance
There are Car Insurances that, in the conditions of the contract, give the total loss car an improved market value , provided that certain circumstances are met.
The improved value is significantly higher than the market value alone, since in this case the appraiser also takes into account the prices and characteristics of the second-hand market, which means that the improved market value is always higher.
In these cases, in addition, the compensation for the damaged car is calculated by adding a percentage to the value that is determined in the policy clauses.
When is the market value applied, to new and replacement
The conditions of the policy must establish the type of value that the insurer will give to the vehicle in case of total loss. In most cases, the age of the vehicle will determine what type of value the company insures that car for.
Each insurer applies these valuations in accordance with its insurance offer, although as a general rule, cars less than two years old are offered compensation, in the event of an accident, according to the new or replacement value.
If the vehicle is between two and four years old, we can find compensation according to the improved market value in a percentage that is usually specified in the contract. Of course, the total loss of a car with more than five years is usually compensated according to the market value.