Sometimes getting an auto insurance policy can be a little tricky to navigate. With so many terms out there, and various types of coverage it can be hard to understand what is best for you and your needs. One term that you may have heard floating around is “deprecation waiver”. If you are buying a brand-new car, you may have been advised to get one. But, you may have been unsure as to what it does. What is it, and how does it help you?
Keep reading to find out what exactly depreciation is in relation to your auto insurance, and how a deprecation waiver could help you in the long run.
Before we look at what a depreciation waiver does, let’s take a look at what depreciation is in relationship to your vehicle and auto insurance.
Pretty much as soon as you drive your car off of the dealership’s lot, it loses value. And, the longer you own your car, the more it goes down in value. This is called deprecation. It is meant to be a reflection of the wear and tear inflicted to a vehicle over time. The more kilometers put on a vehicle, and worse for wear it becomes, the lower the value will drop.
In relation to your auto insurance, depreciation is used to determine the value of your vehicle in the event that you need to put forward a claim. If you are involved in an accident that forces you to write off your vehicle, the value of deprecation before the accident will be used to help determine the claim payment.
So, what does a depreciation waiver do? Does it save you money? Does it protect the value of your vehicle?
In a nut shell, yes, that is exactly what it does. A depreciation waiver is used to secure the value of your vehicle in the event that you do need to write off your vehicle after an accident. To qualify for a depreciation waiver, you must obtain one from your insurance provider when purchasing a new vehicle. This insurance add on does come at an additional cost, however it could save you a substantial sum down the road. With a depreciation waiver, if you do find yourself involved in an accident that totals your vehicle, or it is stolen, the value of your claim payment will equal the full purchase price or the manufacturer’s suggested retail price (whichever is lower). Without the waiver, you will only be eligible to receive the depreciated value.
It is important to note that not all vehicle as subject to a depreciation waiver. The waiver applies only to new cars that will eventually drop in value as it ages and the market changes. Older vehicles, such as vintage collectables are not concerned with the waiver as their value tends to increase rather than decrease. To help protect the value of a vintage car, specific auto insurance can be obtained.