Why won't my insurance company pay me to buy a new car?

“My car is a write-off, so why won’t my insurance company pay for a new one?”

It’s important to understand your policy—“replacement value” isn’t the same as covering the cost of purchasing a new vehicle.

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Q. My car is a write-off after someone crashed into it. Now, even with the “replacement value” my insurance covers me for,  I’ll be out-of-pocket $15,000 to buy a new one. What can I do?
Norman

A. To put it very simply, an insurance policy—any insurance policy—includes something that triggers coverage, and something that the insurance company provides to the insured if that triggering event happens.

Here, it sounds like your car insurance responded because your vehicle was involved in an accident, and what the insurance company is providing to you (among other things, like defending you if you get sued) is the replacement value of your car.

There are two important points to make here.

First, I haven’t seen your insurance policy, but it sounds like what you are covered for is the replacement value of your car rather than providing you with a new car. This is a big difference. This transaction is about providing you with what you agreed to in purchasing your insurance policy. It may be there are insurance products that would provide you with the value of a new vehicle rather than the replacement value of your vehicle, but it sounds like this isn’t what is in your policy. You may want to check with your insurance broker about the availability of these policies and about the price difference. This is a significant jump in coverage, if it is even available, and will be more expensive to purchase.

The second point to make is that every used car is a bit different and the replacement value might be flexible. I’m not sure what vehicle you have but if you plug any vehicle make, model and year into the Kijiji used car pages, you will see that there is a huge range in asking price for that vehicle. To address this large variation in prices, the insurance adjuster you are working with is probably looking at some sort of standard value database in developing your offer. The reality is that you will come out ahead on this offer if your car was poorly maintained and in worse condition than the “typical” make, model and year of your vehicle, but you will not come out ahead if your vehicle was in better condition than the “typical” vehicle that value is based on.

I’ve spoken with clients about this issue a few times over the years. It normally ends there just because it doesn’t make any financial sense to retain me to try to push the price up a bit. I know that some clients who lost a vehicle that was well-maintained have had success increasing the replacement value offer by providing the insurance adjuster with advertisements for vehicles that appear to be in better condition than the average, and at a higher price because of this. It may also be helpful to provide the adjuster with receipts showing any recent work done. For example, if your vehicle has brand new brakes and brand new tires, it is worth a bit more than one that does not.

Scott Hawryliw is a civil litigation lawyer with SRH Litigation in Barrie, Ont. He helps clients with legal problems related to injuries, employment, and business issues and can be reached at [email protected]

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