What is indemnification without depreciation?
If you buy or lease a new car and it is stolen or declared a total loss following an accident, the insurance company will give you a check for the value of a new vehicle (sales tax included), subject to certain conditions. It is compensation without depreciation. This warranty is only available if you are the first owner or lessee of the vehicle. This clause cannot be added to a contract covering a used car.
Without this clause, you will get the depreciated value of your car at best. It will force you to find an acceptable used car in comparable condition or dig around to pay the difference compared to the cost of a new car. Most insurers offer this clause for two years from the date of purchase. Some insurers offer it for periods of up to five years.
How much does it cost?
The cost depends on the vehicle and the insurance company, but it can cost $40 and $60 per year. I was paying $50 a year. This cost increases each year as the value of your car drops, but the amount will remain minimal.
Who should take advantage of this clause?
Anyone who drives a new car, but especially people who don’t have the money to pay cash for their vehicle and lease or finance it.
This clause is particularly interesting if your car is stolen or declared a total loss. You will then have to repay your loan or lease, even if the amount remaining to be paid on loan or lease is possibly higher than the depreciated value.
Of the $26,000 borrowed to buy my car, I had $15,000 left to pay. This sum coincidentally roughly corresponded to the depreciated value. My insurance company wrote me a check for the total value of $26,000. After paying off my loan, I had a good amount of money on hand to put down on my next new car.
