When buying insurance, most people ask for "full coverage" without knowing what they are asking for. What is the problem? There is no "full coverage". While understanding your coverage is important for everyone, it's vitally important if you drive a Mercedes, BMW, Bentley, Rolls-Royce, Porsche, Viper, Ferrari, Lamborghini, Lotus or Aston Martin.
If you drive an expensive, exotic, or high-performance car, you'll want to make sure that after an accident you receive OEM parts, OEM paint, the ability to have your vehicle repaired at the auto shop of your choice, and the Amount money needed for the repair.
Repairing an expensive car with non-OEM parts and/or poor workmanship will result in substantial diminished value. With expensive cars, even a good repair will lead to a decrease in value. What is Diminished Value? This is the reduced market value of a vehicle after repair. For example, a Porsche or Ferrari will be worth less after an accident, even after being properly repaired. For research on diminished value, see http://www.hurt911.org/acident/car-acsident-car-value.html
You don't want to argue with your insurance company about whether your vehicle can be repaired or needs to be totaled. Often insurance companies will want to fix your car, when you think it should be totaled. If the insurance company agrees to total your car, most insurance policies only provide "true cash value" insurance coverage which would only give you a payment based on the current replacement cost. of your vehicle, less depreciation (the decrease in the value of your car value due to use, deterioration and the passage of time).
In the event that an exotic or high-priced car is totaled, the best replacement coverage is “Agreed Value” or “Declared Value”. The only insurance companies I have found to offer agreed value insurance are Chubb and MetLife.
Chubb's website states: "You and Chubb can agree on a value and lock it in for a full year. This is the exact amount you will receive if your car is stolen or totaled in a covered loss. Regardless of the “book” value. We even waive the deductible. No haggle, no depreciation, no deductible, no problem.”
MetLife's website states: New Total Loss Equivalent Automobile Replacement is offered for vehicles within the first year of purchase or first 15,000 miles, whichever comes first.
What is the difference between Chubb's "Agreed Value Option" and MetLife's "Equivalent New Automobile Replacement" coverage? For high-value cars, Chubb is definitely the best choice. Chubb offers its agreed value coverage annually and readjusts the agreed value upon policy renewal. From what I've seen, the agreed value adjusted years and over 100,000 miles later is significantly higher than the actual value. Additionally, on a different topic, Chubb also offers up to $1 million in underinsured coverage, which is also vitally important. Be sure to ask your Chubb agent for the maximum underinsured coverage.
For mid-value new cars, MetLife is a good choice. MetLife does not offer its new equivalent automobile replacement coverage after the first year or 15,000 miles. For drivers of most new cars, it's still a good value because it's not uncommon for someone to total up their new car soon after buying it. Usually, just driving a car out of the showroom can result in a $10,000 depreciation.
