Accidents, Auto Repairs, Insurance Companies and Betterment …
It sounds like the name of a bad, Hollywood Romcom. In the case of an auto insurance claim, it’s worse. It’s neither romantic nor comedic.
Over the years we’ve seen claim situations where the claims department depreciates what they’ll pay for parts. This typically occurs with older vehicles and can leave the consumer holding the repair bag.
This is part of the insurance contract that does not allow “betterment.”
As explained by one claims department:
Betterment applies on items that have a finite life span, or to areas of a vehicle that have prior damage that overlaps new damage.
In this case, the policyholder has a 15 year old vehicle that needs new mechanical parts. These parts wear over time and are not expected to last the lifetime of the vehicle.
The policy owes for the actual cash value of the parts lost or damaged. The betterment accounts for the difference in value as the vehicle is getting new parts.
In effect, it is depreciation. The policy cannot leave the policyholder in a better position after the loss than he was in before the loss. The betterment makes the depreciation adjustment so that the claim keeps him on equal footing and allows for the actual cash value of the parts being replaced.
In a few extreme cases, when depreciation has seemed excessively penal, when it comes to insurance companies and betterment, our Agency has been able to talk to the claims handler and negotiate a more reasonable settlement.