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What you should have if you have a customized vehicle
Restoration Coverage is the coverage most people believe they have, but they learn later on that they do not. They do not even remember this was an option offered to them when they purchased insurance. Terms like Actual Cash Value and Replacement Cost are deceiving because they imply that your loss will be completely covered, but as it is discussed in this website, insurance companies have defined such terms that they will either depreciate or pay for what you were supposed to have.
The term supposed to have is in italics because this is where the misrepresentation (in my view) exists. Replacement cost is supposed to replace what you have, correct? Well, insurance companies have restricted or construed this to mean what you actually have insured. To illustrate this point, here is an example using the three types of coverage (Actual Cash Value, Replacement Cost, and Restoration Cost):
If you have a 1995 Ford Mustang with custom wheels, and your vehicle is a total loss, the loss will be paid as follows:
Actual Cash Value: The value a Ford Mustang will have today. Even if your car is in good condition, the insurance company will look at comparable vehicles and average those values. The depreciation is taken into account and you usually will get a substantially reduced price. Seldom can insureds turn around and find a similar vehicle (same condition, mileage, options, make, year, and model) for what they get in the total loss settlement.
Replacement Cost: The value to go buy a NEW Ford Mustang. This is great, except that insurance companies will first pay the Actual Cash Value, and then, when the vehicle is replaced (purchased), pay the difference.
Note, the replacement cost will allow the insured to buy a new Ford Mustang without the customized options. Insurance companies are very picky about customized options, and unless you clearly had all your options outlined in your policy, the insurance company will pay the stock version of your car.
Sometimes, Replacement Cost is not necessarily a bad coverage. However, if you do have a nice vehicle with different things that add value to it (e.g. wheels, rims, stereo, GPS, custom paint, etc.), the insurance company will not be covering any of them.
Restoration Coverage: The Ford Mustang will be restored to the exact same point it was before the accident. All options, wheels, rims, stereo systems, etc. must be paid the way the insured had them. This coverage works the way insurance should really work.
Having restoration coverage is not cheap these days, and insurance agents do not offer it and most of them do not even know that they could sell it (they are used to selling the most common policies).
Replacement cost should cover most accidents for most consumers. However, insurance agents are especially bad about documenting the condition and the options of vehicles.
If you are a smart consumer, you probably have your agent document everything that is important to you. Also, remember that if you buy something for your vehicle, you are better off to have it “documented” with your agent when the said feature was newly bought and not when you have a claim.
Click below for an explanation insurance coverages and terms:
Automobile Liability Insurance or Liability Page 1
Automobile Liability Insurance or Liability Page 2
Automobile Medical Payments or Personal Injury Protection (PIP) Page 1
Automobile Medical Payments or Personal Injury Protection (PIP) Page 2
Collision Coverage (Protection Against Loss to the Auto) Page 1
Collision Coverage (Protection Against Loss to the Auto) Page 2
Comprehensive Coverage (Protection Against Loss to the Auto) Page 1
Comprehensive Coverage (Protection Against Loss to the Auto) Page 2
Under or Uninsured Motorist Property Damage (UMPD) Page 1
Under or Uninsured Motorist Property Damage (UMPD) Page 2
Under or Uninsured Motorist Bodily Injury (UMBI)
Rental Reimbursement or Loss of Use Coverage Page 1
Rental Reimbursement or Loss of Use Coverage Page 2
Insurance Clauses and Terms
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