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Entries in Insurance (1)

Tuesday
Sep152015

Why Was Walter "Written Off"

In a brief exchange with our Twitter friends it surfaced that Walter did not seem to have a lot of damage, and that perhaps insurance companies are a little too pragmatic.

It was an interesting learning experience for us too...

Cars Depreciate:

We all know that depreciation is an intrinsic part of vehicle ownership, and vehicle values. In the case of Walter it was well down the depreciation curve after 13 years. Fortunately it still had a market value.

Replacement Parts:

The cost of replacement parts does not depreciate along with the vehicle. A vehicle might be at 50% of its original value, the part remains at 100% of its value.

On older vehicles (perhaps not that old) insurance companies prefer to find used parts to repair a vehicle. In the case of Walter used parts are not easy to find, while a headlamp assembly is the price of a used car from back in the day.

Wear and Tear:

On older vehicles there is an element of wear and tear, in the case of Walter replacing only 1 headlamp assembly (the broken one) then the entire front of the car looks silly with a new and worn headlamp.

Condition:

Walter might have been a little old, but it was in good condition, the interior was impeccable for a 13 year old car, and there was no other existing body damage on the car. The 18 inch wheels with the summer tires augmented the appeal of the car. The condition and appearance of the vehicle will influence the insurance company.

Accident Reports:

With an accident report being an intrinsic part of any used vehicle these days, any owner needs to be well aware that an accident/repair vehicle has less value than a non accident vehicle. In the case of Walter this was not an issue...a little too old to make a difference.

Plastic:

Lets call it plastic for the sake of simplicity, in an innocent "encounter" a ton of plastic is shredded and falls off the vehicle. Headlamps, bumper covers, parking lights, side marker lights, headlamps washers, foam bumpers behind the bumper cover. Its a shower of plastic.

Obvious that all these plastic parts/assemblies need to be replaced and have a non depreciated cost.

Value:

In our case we had exceptional service from our insurance company. They arrived at a reasonable value for the car, and a quick settlement. Be aware that trying to negotiate the value delays the settlement. Obvious that Walter was not financed, leased, etc and there are less stakeholders in the value.

Doing your own due diligence is a must, since the insurance company will do its due diligence, and probably access its own database to arrive at a value.

Vehicle:

Once its settled the insurance company picks up the vehicle from the body shop, and sends it to the salvage auctions probably to be auctioned off. Its not turned into a metal cube.

Reality:

In our case it was a minor "encounter" no one was injured, we drove Walter to the body shop. The insurance company settles Walter with us, and subsequently resells Walter to recoup a portion of the settlement.

Its the reason we pay insurance premiums...to deal with the $%# when it happens.