How to insure a car with no book value in a collision

What happens when you want to purchase auto insurance for a vehicle with no book value?

Often the answer is yes. But it might not always make sense to do so.

Collision coverage pays up to the actual cash value (ACV) of a car when it is damaged during a covered event. Insurers use sites like Kelley Blue Book and others that provide information on used car prices to determine the value of a vehicle.

Before purchasing collision insurance, it is essential to understand how it works, the value of your car, and how much you might receive from the insurance company if you need to file a claim.

How does collision coverage work?

Collision coverage helps pay for vehicle repairs – up to the car’s current market value – if you’re in an accident. But first, you need to pay your deductible. For example, let’s say you have a $ 500 deductible and $ 2,000 in damage to your car. You must pay for the first $ 500 of damage. And the insurance company will pay the remaining $ 1,500.

If the damage exceeds the value of the car, your insurer will issue a check for the ACV less your deductible.

Determine the value of a car when there is no book value

There are two main reasons why a car may not have a book value: it’s too old, or it’s a custom or classic build car. Whatever situation you find yourself in, determining the value of the car can be as simple as entering your vehicle’s license plate number or the year, make and model.

New research shows people drive cars longer, and many economic factors keep used cars in short supply, driving values ​​higher. So the book value of your used car two years ago could be hundreds or even thousands more in 2021.

Old car

Here are some ways the insurance company can determine the LCA of a vintage car with no book value:

  • Market assessment. “They’ll browse Autotrader or other comparable sites – wherever you can get used cars – and they’ll see what other cars like this are selling for,” said Shane Page, president of Piedmont Insurance Associates. , an independent insurance agency from the North. Caroline. Based on their research, the insurer will come up with a value for the car. “If it’s roadworthy and rolling, it’s probably worth at least a few dollars more than the deductible,” he says.
  • Declared value. In some cases, the insurance company may accept a declared value, which means that the insurance company takes the customer’s word for the value of the car. And it is not verified until there is a complaint.
  • Cost in new condition. In this scenario, the insurer determines the value based on the value of the car in new condition. They use a mathematical algorithm that takes into account the depreciation according to the age of the vehicle. And the insurance company uses that to determine the value.
  • Evaluation. Depending on the company, the insurer may require you to do an assessment. “In most cases, there’s very little value,” said Robert Raymond, vice president of private client advisers at HUB International, a global insurance brokerage firm. “Often older vehicles have emotional or sentimental value to the owner. They are worth much more to the insured [than the insurable value of the car]. “

Custom build or classic car

Collision coverage for these types of cars is purchased on a declared value basis. “The owner of the vehicle and the insurance company have to come to an agreement and say that is what we value the car on,” Raymond said. “No matter what happens, this is the valuation basis on which we repay.”

How the specified value is determined depends on several things.

  • Original owner. If you are the original owner or if you built the car yourself, you probably have an idea of ​​its value based on the price you paid for the vehicle or the parts needed to build it. If you built it yourself, you can estimate the value of your labor and add it to the cost of parts. With that information, you can probably get an insurer to agree to an appraisal, Raymond says.
  • Auction. If you bought the car at auction, the insurance company may accept the initial auction appraisal.
  • Evaluation. If you can’t easily determine the value or prove what it’s worth, you may need to get an appraisal. According to Page, in many cases, owners have the car appraised when they buy it. And insurers can use this value as the declared value. “Usually there is a window of several years from which they will accept an assessment,” he said.

How much does collision coverage cost?

The price you will pay for collision coverage varies widely depending on a number of factors including the value of the car you are insuring, your driving history, your age, the insurance company, and many more.

Page says you might be able to get collision coverage for less than $ 100 a year on a car that’s only worth $ 1,000 or so. But Raymond says a policy can still cost you anywhere from $ 800 to $ 1,200 a year, even for a low-value vehicle.

If you have a custom or classic build, you will usually pay more because the value of the car is higher.

Is it worth insuring a car with no book value in a collision?

The suitability of insuring a car with no book value depends on the value of the car, your insurance premium and your deductible. If your annual premium and deductible expenses are more than what the insurance company would pay if you file a claim, it may not make sense. But if you have a high value vehicle, it’s probably worth it.

If you are looking to get a collision for an older car, “Be prepared for reality to hit you hard when you talk about appraising your vehicle if it is not a custom car”, Raymond said. “Old cars are generally more valuable to the driver than to the market. It can be difficult to find physical damage coverage for these older cars. “

And while you can find coverage, he often doesn’t recommend insuring it for physical damage. “Adding a policy could make its cost very prohibitive,” he says.

But Page says that’s not always true. “More [insurance] companies are quite generous in terms of settling claims with Blue Book Value. If you wanted to trade in your car or sell your car to an individual, these values ​​will be lower than what you would get from an insurance claim.

Ultimately, the decision to get collision coverage is a personal one that you must make. “Our approach would just be to have a really honest and transparent conversation with the client about the mathematical trade-off and how the claim would be handled and let them decide how much financial risk they are willing to take,” explains Page.

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