Replacement Cost vs. Actual Cash Value in Seattle, WA – What does it Mean?

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An insurance policy usefulness is determined by the policy language used. Specific policy language determines what is covered, what is excluded and the amounts covered under the policy. Reviewing your insurance policy language every now and again may be helpful in the event of a claim, as you would have a better understanding of what may be covered.

Insurance policies are full of language and terms that may not be clear right off the bat. Many terms are specific to the industry and to the specific type of insurance that is being purchased. Two such terms are Replacement Cost and Actual Cash Value. These terms can be a bit confusing to decipher between.

Replacement cost vs. Actual cash value in Washington:

  • Replacement cost is very simple: It is literally the cost to replace your item with an item of similar quality. Replacement cost policies tend to be a bit more expensive since you are essential getting a brand new item for one that may have otherwise depreciated. Replacement costs are agreed upon by all parties before the insurance policy is finalized. If you have high-ticket items (jewelry, art, RV, boat, luxury vehicle or classic car) this may be the best type of coverage if you can afford it.
  • Actual cash value is the cost to replace the item minus any depreciation. For example, if you were in an auto accident and you had an actual cash value policy, your insurance would pay out the cost of the vehicle minus any depreciation, so if your vehicle is worth less than what you owe you would be responsible for paying that difference out of pocket, unless you had gap insurance. An actual cash value policy can put you in a tight spot if your items cost more to replace or repair than your policy pays out. Depreciation values for big ticket items like RVs or luxury cars can be quite large, so make sure that you have a nest egg and be prepared to pay some out-of-pocket for a loss if you have an actual cash value insurance policy.

No matter which policy type you choose, the local experts at Secord Insurance Agency can answer any questions and walk you through the different types of scenarios to see which policy type is right for your situation. Secord Insurance Agency in Seattle, Washington can guide you through your homeowner’s insurance policy and more, like auto insurance. Their years of insurance experience can save you a bundle, and they live right in your area, so know firsthand what your insurance needs might be. You can also visit their insurance website 24/7 to learn more about the insurance products they offer.

Closing the Gap – Gap Insurance in Seattle, WA

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Congratulations, you just bought a new (or new to you) car! You were able to afford a down payment and now you are the proud owner of a new car and a monthly car payment. But, what happens if your car becomes involved in an accident and you owe more than your car is worth?

Imagine this scenario: While out enjoying your new car, you hydroplane and hit a guardrail damaging your new vehicle beyond repair. The insurance company is telling you that your new car is a total loss. While you may not be able to drive the vehicle, you are still responsible for the loan associated with vehicle. If you have gap insurance in Seattle, WA, you may be only responsible for your deductible.

How gap insurance in Washington works:

What is depreciation:  Vehicles, especially new vehicles, begin to depreciate as soon as you drive them off the dealer lot. Depreciation can be quite surprising and is not necessarily tied to the base cost of the vehicle. Due to wear-and-tear, fluctuating market conditions and a number of other factors, depreciation in the first year is the steepest. Even with proper care and maintenance and no accidents, a vehicle will continue to depreciate. Even though the value of the vehicle will go down each year, the amount you owe on the vehicle will not. Depreciation will vary between make and model but here is a baseline comparison:

Year Vehicle Style Base price Depreciation year one
2013 Subaru Legacy 2.5i sedan $21,295 $3,069
2013 Honda Civic Base sedan $22,715 $4,406
2013 BMW 328i sedan $34,900 $5,198
2013 Ford F-150 $28,595 $5,915
2013 Toyota 4Runner $37,155 $6,380

 *Figures courtesy of automobilemag.com

Why gap insurance: In the unfortunate event that your vehicle is totaled, and it is an event covered under your current auto insurance policy, your insurer may pay the actual cash value of the vehicle, which may be significantly less than the outstanding vehicle loan. In that case, you would still be responsible for the remaining balance between the loan and the insurance payout, which could be thousands of dollars. If you choose to purchase gap insurance in Seattle, Washington, your insurance company would cover the remaining balance between the actual cash value of the vehicle and the remaining loan balance, typically up to 25 percent, potentially saving you thousands of dollars.

Options for gap insurance: There are two options for purchasing gap insurance in Seattle, WA. It can be purchased from the dealership or through an insurance agent. If you choose to purchase gap insurance through the dealership you purchase your vehicle from, the gap insurance will be built into your loan. The average price for gap insurance from a dealership is around $1,000, but add interest and taxes and it can add up to much more. If you choose to purchase gap insurance from an insurance agent, on average it would add less than $10 per month to a policy! There may be certain stipulations associated with a gap insurance policy:

  • The loan may need to be through a financial institution rather than an individual
  • Your current auto insurance policy may need to include Collision and Comprehensive coverage
  • Your claim may need to be a covered Collision and Comprehensive coverage event
  • Your vehicle may need to be determined as a total loss

Before you purchase a new vehicle, make sure to check with your licensed insurance agent in Seattle, Washington to see how you can add gap insurance to your new vehicle policy. The local, independent agents at Secord Insurance Agency can assist you with adding or amending an existing policy or setting you up with a new policy. Their years of insurance experience can save you a bundle. You can also visit their insurance website 24/7 to learn more about auto insurance or the other insurance products they offer like classic car or home insurance.

Seattle Auto Insurance Myths | Secord Insurance Agency in Seattle, Washington

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Let’s face it; auto insurance can be confusing, especially when it comes to insuring new vehicles. When trying to look up information surrounding auto insurance in Seattle, WA, the internet can be full of myths and misinformation. If you are trying to disseminate fact from fiction the experts at Secord Insurance Agency can help. We have compiled some common insurance myths and facts; we like to think of it as our own insurance version of Mythbusters.

Five auto insurance myths:

    • Color:
      Have you always wanted a red car, but never did because you thought it might drive up your auto insurance premium in Seattle, WA? Not true. Insurance premiums factor in the make/model, age and power of the vehicle. Premiums are also based on the person being insured.The cost of the vehicle can also influence the
      price of the premium, as more expensive the car usually the more expensive it is to repair if it is damaged in an accident.
    • Mature Drivers:
      Heard that once you enter your ‘golden years’ your auto insurance premiums will increase? Not necessarily. Your local, independent insurance agent can
      assist you with senior discounts or get you resources for defensive driving courses which can also lead to a discount.
    • Optional Coverages:
      Basic auto insurance will cover theft or weather-related damage. Claims such as these are only covered under comprehensive coverage. Most car loans
      require that you carry both comprehensive and collision as these protect the vehicle fully. If your car is getting older and worth less than $1000, you
      may want to opt-out of these coverages, but you will want to talk this over with your agent before dropping these coverages completely.
    • Loaning your vehicle:
      Does your best friend need to borrow your car for the day or leaving your mom the car to pick up the kids from school? If they get in an accident,
      their insurance will cover it, right? Wrong. Typically insurance follows the vehicle, not the driver. However, that is not always the case. Rules and
      regulations for this specific instance vary by state, so you will need to clarify with your insurance agent before you loan out your vehicle.
      Additionally someone who has regular access to your vehicle, like a roommate or spouse, should be added to your auto insurance policy to prevent a
      messy claims process should they be involved in an accident while driving your vehicle.
    • Personal v. Business: 
      Your vehicle is covered under your personal auto insurance policy in Seattle, WA whether you are using it for pleasure or business. Not entirely
      accurate. If you are using your vehicle often for business, purposes, a business auto policy may help protect your vehicle more thoroughly. If you are
      not self-employed but use your personal vehicle for work, make sure you covered by your employer’s commercial auto policy.

While these are the most common myths associated with auto insurance, others are out there. Your licensed insurance agent in Seattle, Washington can assist
you with any questions or concerns you may have about your auto insurance policy. The local, independent agents at Secord Insurance Agency can assist you
with adding or amending an existing policy or setting you up with a new policy. Their years of insurance experience can save you a bundle. You can also
visit their insurance website 24/7 to learn more about auto insurance or the other insurance products they offer like classic car or home insurance.