Understanding Depreciation When Making An Auto Insurance Claim
Car depreciation can have a large impact on how much money you receive from your insurance company if and when you need to file an auto insurance claim. Simply stated, depreciation is the value of your vehicle based on its age and current condition, compared to the original value when it was new.
Every car begins with a specific value when it is brand new on the dealer's lot. Unfortunately, car depreciation begins the very minute that a new car is purchased and driven onto a city street. The initial depreciation is relatively steep, but it levels off to a more reasonable level within the first few months of ownership. When you have your car insured, the value that the insurance company places on your vehicle will be the officially accepted value for your car's make, model and year at the time that you sign your insurance papers.
As you drive your car, it will naturally depreciate from the initial value that was set by your insurance company when you purchased your policy. If you keep the same policy for several years without making any updates, you may be surprised when you make an auto insurance claim and discover that your car is only worth a fraction of what it was worth originally. It is important to keep track of a car's depreciation as it ages. There are other factors that can cause a car to depreciate faster or slower, such as the durability of the type of car and the maintenance record that you keep.
The best way to monitor your car's depreciation levels is to check with your insurance company once every year. Your insurance agent will be able to tell you how much the standard depreciation is for vehicles like yours over the span of 12 months. If you are unhappy with the depreciation numbers that you receive from your agency, you can always take advantage of an easy online insurance quote site to see how your car is valued through other insurance companies.
Some insurance companies offer coverage that does not allow for car depreciation if the car is less than three years old. These agencies will pay you the full original value of your car if it is totaled before it is four years old. After a car has reached that four-year age marker, however, you will have to deal with the natural depreciation of your vehicle due to regular wear and tear. The only way to avoid depreciation is to purchase a new vehicle once every two or three years in order that your car will always qualify for any special insurance incentives.