Do you have an old car? Your insurance company may not cover its full value

When it comes to car insurance, every driver’s main concern is how much the insurance company will pay in the event of an accident or total loss. This is especially true for those with older cars, as their values ​​are much lower than those of newer cars. In this case, if the driver of an older car were to have an accident and file an insurance claim, the insurance company may not cover its full value.

Current inflated used car values ​​can affect your insurance rates and coverage

A woman talks on the phone in front of a flood damaged car on a street filled with mud and debris the day after the flash floods. | Joan Cros/NurPhoto via Getty Images

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As you may have heard, used car prices have skyrocketed over the past couple of years due to the global chip shortage and resulting inventory shortage. Older cars that are really only worth a few thousand dollars currently sell for three times as much. For example, reports that a Toyota Camry Solara with 120,000 miles on the odometer may have a Kelley Blue Book value of $2,000, but some dealerships are selling them for between $6,000 and $8,000 in today’s market.

If you currently own a car that is 10 years old or older, you might think that inflated car values ​​may increase your auto insurance premium, but luckily, that’s not the case. Instead, the high used car market negatively impacts your older car’s insurance policy when you have an accident because those high price tags aren’t used when the insurance company writes you a check.

Concrete example ; ABC 7 in Denver recently reported on 20-year-old Ford Crown Victoria owner Herm Harrison who ended up in a fender bender. Another car hit the rear panel of his car, so he took it to a workshop for repair. After all was said and done, the bill came in at around $3,000, but her insurance company didn’t have it. Instead of paying for the damage, Harrison’s insurance company said the cost of the repair was more than half the car’s value, so they would total it up and offer him $1,800 for it.

Harrison said he’s seen cars like his sell for between $6,000 and $10,000 on sites like AutoTrader and eBay, however, insurance companies don’t trust those numbers.

Insurance companies will look at the “actual cash value” of the car

A car was damaged by flooding on a street filled with mud and debris.

A car was damaged by flooding on a street filled with mud and debris. | Joan Cros/NurPhoto via Getty Images

The reason Harrison’s car was “totaled” by his insurance company instead of paid for was because of the car’s “actual cash value”. Hagerty defines “actual cash value” as the value of the car on the day of the accident before the damage it sustained, not what you originally paid for the car.

The “declared value of your car can ensure a larger payment

Paint damage above the headlamp of a car.

Paint damage above the headlamp of a car. | Alexandra Schuler/photo alliance via Getty Images

If you own a car that is 10 years old or older, you can consult your insurance company about the “declared value” of your car. This value refers to the amount indicated when taking out the insurance policy. Haggerty says the only caveat to this value is that the insurance company can always choose to pay either the car’s “declared value” or “actual cash value,” whichever is lower.

Either way, if you want to make sure your old car is fully insured, be sure to speak with your insurance company about its value and the type of coverage you need. Otherwise, you might not get paid the right amount if the worst-case scenario occurs.

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