The story, or rather the problem, is all too familiar; dissatisfaction or dissatisfaction with the insurance premium for his vehicle.
More often than not, this stems from a policy purchased without reading or understanding the fine print as to where and for what the stated amount goes.
As such, this often leads to a case being opened with the Short Term Insurance Ombudsman when things go bad.
In order to avoid confusion and ultimate anger, the Office of the Ombudsman has highlighted the following points that are worth considering:
- The retail value of your vehicle
An often controversial term, retail value takes into account the value of your vehicle when it was sold or the cost of replacing it if it is stolen or written off.
As is common knowledge, the higher the retail price, the more it will cost to insure, however, this guarantees the highest possible payout when you claim.
When you’re paid retail value, you’ll be more likely to replace your vehicle with a vehicle of similar make, model, specification, and condition.
- So what is the market value?
Just as controversial as retail value, a vehicle’s trade-in value applies to the amount it would cost to buy or trade-in a vehicle at a dealership.
According to the Québec Ombudsman, “this is generally the lowest value for which you can insure your vehicle and it is not the recommended option. However, it would still be a better option than being without insurance coverage.”
- Understanding Market Value
Probably one of the trickiest, market value is determined based on age, mileage, condition, level of specification, service history, accessories fitted and depreciation value of the vehicle.
Once calculated, this is then adjusted and compiled into an amount used by dealers and insurers to arrive at a final price.
“If you find retail value insurance unaffordable, market value may be an option. You will probably have a shortfall when replacing your vehicle, but you will come out of it better than if you had insured your vehicle at its exchange value,” indicates the Québec Ombudsman.
However, he points out that “there is also a risk that if your vehicle is still financed, you could suffer a shortfall from the finance house after the insurer has settled your claim. In other words, you may still need money to finance ‘house’.
“It is therefore advised that if you choose this option, you do so after considering all the options and the financial implications of each option.”
- Shake hands on agreed value
As the name suggests, agreed value reflects the amounts agreed between the insurer and the seller.
A regulation that generally applies to classic, rare, vintage or special edition vehicles, the exact amount is often difficult to calculate depending on any of the factors mentioned, meaning an agreement with the insurer is advised rather than discussing the final amount.
“When you make a claim, the insurer will pay the agreed value minus the applicable deductible, and depreciation would not normally be taken into account unless expressly provided for in the policy,” the office says.
- Finally, don’t be afraid to ask
Given the huge range of different fonts on offer, eventual understanding comes down to the simple method of asking and explaining.
As this could lead to further confusion or excessive amounts, it is essential to ask or inquire.
“Consumers are recommended to ask as many questions as possible to understand their insurance policies, read their policy documents and, when something is unclear, seek clarification from the insurer or broker, where appropriate,” advises the office.
“It is important that consumers understand their own unique situation and what level of cover would be right for them in order to obtain the most appropriate cover and avoid disappointment at the claims stage. It is also important to remember that as circumstances change, the level of coverage should also be reassessed and adjusted accordingly.
More details can be obtained via the office of the short-term insurance ombudsman.