Quote:
Originally Posted by katy
Should a car be insured for more than it's worth, so that it's covered in case the damage repair costs are more than the car is worth?
Old car insurance is relatively cheap, so it's not worth undervaluing a car just to save a few $$ on insurance.
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The way you word this is what makes this confusing. You aren't insuring it for more than its worth, but instead you are insuring it for what it IS worth.
In other words, you are basically stating you want to insure for enough funds to repair or replace to the exact same condition as your vehicle was in about 5 seconds prior to the casualty.
Paul Shinn has a great video on YouTube regarding the difference between a car that is 'sorted' vs. one that is unreliable. The "worth" difference between these two cars can be as much as double. Unfortunately most underwriters use comparable that are for sale to establish a value. Pictures of a vehicle for sale and the description in the advertisement are not always accurate.
For example, if you have a Model-A Tudor that is advertised as "restored" however it will barely run enough to pull itself out of the garage, and the condition of the brakes and steering make the car dangerous to drive, would you not agree with me it is worth much less than another one that looks exactly the same cosmetically however this Tudor can safely Start, Stop, and Steer, and it can do this in a reliable manner for many miles? The issue with most underwriters is they cannot differentiate between the two types when looking for comparable vehicles for sale, and they make assumptions. Most underwriters are NOT car people. Their knowledge is limited other than to say it looks pretty in the pictures.
The second part of this is, when your vehicle is involved in a casualty it is assumed the vehicle will need to be professionally repaired. Since the Pandemic (-and likely even before that period), prices for labor and materials have escalated drastically. If a typical specialty collision repair shop is charging $100 an hour and you have insurance for $12,000 on your vehicle, most adjusters use the 80% rule meaning if the estimated repair costs are close to $9,600 or more, the vehicle is considered a 'total-loss'. When you are in that situation, you quickly find that rarely will that $9,600 make the complete repair to your vehicle.
Additionally, the other thing that has affected the industry is these insurance companies are under contract with a salvage company that they agree to take all of their salvage vehicle. Therefore the practice of buying your car back from the insurance company is gone in most areas because of their contract with the salvage company. The only way that I have seen this circumvented is when the car owner paid the difference out of pocket to have the repairs completed by the shop. So if you have a Tudor that would cost $25k to replace with a truly equal vehicle, and you have it insured for $12k however the repair costs are going to be $25k, -you either get to pay $13k out of your pocket, ...or you accept the $12k from the insurance company and surrender your damaged vehicle. Either way, it costs you $13k out of pocket to find a replacement for exactly what you had simply because someone was being frugal with their coverage.