What To Expect When You Least Expect It

Here’s a scenario for you: You drive a 10 year-old car, planning to one day replace it. Whenever it breaks down, and it seems to break down a LOT these past few years, you question the logic in putting yet more money into a car that really isn’t worth much. But you love your car, and you haven’t had a payment on it in five years, and maybe the six thousand dollars that it has cost you in the last four years isn’t so bad.

Until one day, out of nowhere, some jerk runs a red light and broad sides you. Your car is wrecked, and now you have to make an insurance claim.

The good news is that the accident is NOT your fault, so your rates won’t be going up.

Here’s where things can get confusing. If the cost to repair your car exceeds the value of it, the insurance company will write the car off. So for only $3500 you can get your car back in tip-top shape, but the vehicle is only worth $2500. At this point, the insurance company is obliged, under the terms of the contract, to only give you $2500. Bummer…

This type of scenario plays out all over Ontario every day. But your situation is different, right? You have invested six grand into your car, just in the past four years! Isn’t your car worth MORE than $2500? Isn’t your car worth $6000?!?

The short answer is that it’s simply not worth more than $2500, regardless of how much you spent to keep it running. The value that the insurance company calculated for your car is based on a car that runs and passes a Safety Test. If you had not spent all that money, your car would have gone to that big parking garage in the sky years ago. Unless the money you spent was for custom rims, upgraded stereo and upholstery, and one of those cool chrome steering wheels, it has no bearing on the intrinsic value of your ride. Sorry.

On the bright side, now you can use the insurance claim proceeds as a down payment on that shiny new car you saw at the dealership. And moving forward, you will have a consistent and reliable car, with a consistent and reliable payment. Plus, your Broker can show you how the new technology and safety features available on today’s new cars can sometimes make for smaller insurance premiums than you think.

Bet you didn’t expect that.

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