At 08:43 AM 9/16/98 -0400, baldycotton@pop.mindspring.com wrote:
>....
>I disagree with Barney about it being lose/lose, if I read his letter right.
>
>If the Company sells you insurance based on "Agreed Value" and you total
your car, the "agreed Value" is by both parties. You buy your insurance
based on that value, and pay premiums accordingly. How can they agree the
value is... say, $15,000, and then after you wreck it say... "Well, we feel
it is worth $10,000."? They asked you to pay premiums for $15k, so that's
what you and they agreed it is worth.
>....
Perhaps I wasn't absolutely clear when I repeated the term "declared
value". Declared Value is the amount shown in the policy. The declared
value can be either stated value or agreed value. Stated Value is what you
say it's worth, not necessarily the real value. Agreed Value is what you
and the insurance company agree that it is worth, also not necessarily the
real value (but much more likely to be close to the real value).
If you have an Agreed Value policy, it should pay out that amount in the
event of a total loss, regardless of the actual value of the car at the
time, even if the car was worth less. This is because both parties had at
some time appraised the car and agreed on its value and the appropriate
amount of insurance coverage. Even if the car somehow gets to be worth
less in the meantime, a total loss should still get a payout of the Agreed
Value. There should be no attemp to change or renegotiate the amount of
the Agreed Value after the fact. An exception to this may be if the
insurance company can show that there was some intermediate loss that was
not a part of the final loss, such as damage as a result of some other
accident that was not reported to the insurance company, and that may have
been paid off by some other means.
If you have a Stated Value policy, it should pay out the actual amount of
the loss up to a maximum of the stated value, but not to exceed the actual
value of the car. This does indeed have the effect of putting an upper
limit on the possible payout by the insurance company. Depending on your
point of view, this may actually be to your advantage. You can (if you
prefer) intentionally state a value less than the actual value of the car,
reducing the amount of the premium you pay. This is not unlike choosing a
larger deductible in order to pay a smaller premium. It's your choice. If
you can afford to absorb a portion of the loss, you may prefer to be
self-insured for a portion of the real value of the car. I'm talking about
collision and comprehensive insurance here to cover your own vehicle, not
liability insurance that covers the loss of others.
One of the problems with stated value coverage is that it is your
responsibility to know the value of your car and to buy the appropriate
amount of insurance. If you state a value too high, you pay too much in
premiums but do not get any additional coverage. If you state a value too
low, you pay less in premiums but may not be getting all the coverage you
need. And if you think your car has change in value, it is your
responsibility to get the policy changed accordingly. I actually prefer
this method of valuing an insurance policy, because there is no continuing
hastle with the insurance company to arive at an Agreed Value, I just tell
them what th car is worth. When it comes time to file a claim, I have to
be ready to prove the value of the car before to the loss. But you always
have to do that anyway. The difference with Agreed Value insurance is that
you must usually prove the value of the car in advanve, like every time the
policy is renewed, generally every year or two, and that means repeatedly
getting it appraised (some inconvenience and expense).
If you have the means to prove the value of your car at any time, you
wouldn't need to have a declared value in the policy at all, either Stated
or Agreed. But the insurance company needs to know exactly what it is they
are insuring for. If the value is not stated in the policy, it will be
otherwise assumed in some fashion, such as "the book value", and the
premium will be set accordingly. If you think your car is worth something
other than "the book value", then you had better get some specific value
declared in the policy. This is why most collector car policies will have
a declared value in the policy, because the book value of any car more than
10 years old may be close to zero.
Barney Gaylord
1958 MGA wuth an attitude
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