What does an auto insurance depreciation waiver do?
You may have heard the term “depreciation wavier” floating around in relation to your auto insurance, but were never quite sure what it meant. No worries, we are here to break it down for you. Keep on reading to see exactly what a depreciation waver is, and how it could help you.
What does depreciation mean?
In this instance, depreciation refers to the decline in cash value of your vehicle. Pretty much, as soon as you buy a vehicle and take it off the dealership’s lot, it losses some of its value. Even though you just purchased the vehicle, if you were to turn around and try to sell it right away, you would not get as much as you paid for it.
The longer you have the vehicle, the more of its value you lose. The deprecated value is meant to represent the wear and tear experienced by a vehicle. If your vehicle has a lot of miles, or appears worse for wear, the lower its value drops.
How does a depreciation waiver help you?
A depreciation waiver is an added form of auto insurance that will help to protect the value of your vehicle if you need to put forth a claim.
If you find yourself in an accident where you need to file a claim writing off your vehicle, your insurance pay-out will be the amount of the depreciated value of the vehicle prior to the accident. Depending on the age and condition of your vehicle this could leave you in a tough spot, with not enough money to help cover the costs of a new vehicle.
However, a depreciation wavier can help to ensure a fair insurance pay-out that can work to cover any future costs. If you have to write off your vehicle, or report it stolen, the wavier protects the value of your vehicle. With the waiver, the value of your claim payment will equal the full purchase price or the manufacturer’s suggested retail price (whichever is lower).
Is there an added cost to getting one?
Just like any other form of insurance rider, there is an additional cost for this level of coverage. However, the cost that you would pay per year for the waiver, would more than pay for itself in the event that you need to put forth a claim. Without the waiver you will only be entitled to a payout in the amount of the depreciated value, however, with the depreciation waiver you could expect to receive the purchase price or manufacturer’s suggested price, as mentioned above. The difference between the two could be thousands of dollars.
What type of vehicles are eligible?
A depreciation wavier is not made for every vehicle. Due to its nature, typically only new cars are eligible to apply for the waiver.
Some vehicles, for example vintage cars, would not benefits at all from the waiver as instead of decreasing in value, they increase over the years. In situations such as that there are specialty policies that you can get to protect your vehicle’s assets.
If you are unsure about whether or not a depreciation waiver is the right addition for you and your vehicle, it is best to speak to your insurance broker. They will be able to go into further detail and determine if your vehicle is eligible and if it is worth the extra cost to your auto insurance policy.