11-02-2007, 10:06 AM
Evan Wrote:and all Im saying is that worth is determined when you sign the contract and the rate is set.
The value of the contract is absolutely NOT set when you ratify it. The value is set by current market value at the time the loss occurs. I'm not going to get the same payout today as I would two years from now because my car is worth less. In most cases, they know the value of a total loss because they have your VIN and compare it to similar vehicles. In the case of aftermarket parts, it can get tricky based on the specific of the policy.
Some companies require receipts before they will underwrite you for that amount, some require them on the back end. All that matters is that you prove you had them when the loss occured. Providing receipts when getting the policy is just "pre-proving" your loss before it happens.
Your premiums are set based on the current value, expected depreciation and the ammortization of statistical likelihood that you'll suffer a loss (of whatever magnitude). Insurance companies don't set the premium with the expectation that you'll suffer a loss in the first year, just that you'll pay more in premiums than they do in losses. Sometimes they win the gamble, sometimes they lose but the "house edge" is often in their favor. It's called a Loss Ratio (loss/premium) and agents are rewarded for having particularly low ones. (Note: An agent LR of 0.8 is considered exceptional so it's not like they're always stealing your money.)
That's why older people have particular low rates. They're generally safer so even with extremely low premiums their Loss Ratio approaches infinity. Even a small fender-bender doesn't matter because it's likely they'd paid for 10+ years without a single claim.
Evan Wrote:If the insurance company can change the value of the contract then all of the sudden they have the motivation to defraud you.
That's why the "Appraisal Clause" exists. If you feel the insurance company is undervaluing your loss at the time it occured then you can have an independent appraiser/arbitrator determine the value.
'76 911S | '14 328xi | '17 GTI | In memoriam: '08 848, '85 944
"Here, at last, is the cure for texting while driving. The millions of deaths which occur every year due to the iPhone’s ability to stream the Kim K/Ray-J video in 4G could all be avoided, every last one of them, if the government issued everyone a Seventies 911 and made sure they always left the house five minutes later than they’d wanted to. It would help if it could be made to rain as well. Full attention on the road. Guaranteed." -Jack Baruth
"Here, at last, is the cure for texting while driving. The millions of deaths which occur every year due to the iPhone’s ability to stream the Kim K/Ray-J video in 4G could all be avoided, every last one of them, if the government issued everyone a Seventies 911 and made sure they always left the house five minutes later than they’d wanted to. It would help if it could be made to rain as well. Full attention on the road. Guaranteed." -Jack Baruth