What is the Commercial Value in Auto Insurance?
When purchasing auto insurance in the policy you can see a phrase that says “commercial value”, this is next to the sum insured. When these words are located, it means that the unit will be compensated considering the value of the unit on the date the loss occurred.
That is, the current price of the car will be taken into account when a collision or accident occurred that covers the insurance, such as natural disasters, damage by vandalism, floods, falling trees and more risks that cover the Material Damages coverage. .
This value is determined based on the different price guides that exist in the market, such as the Blue Book or EBC or the Autométrica.
Therefore, the insured will only know the compensation of his car when the accident or loss occurs, and it is possible that a lower amount will be delivered, compared to the price that the owner paid when he acquired the car, because the depreciation that cars suffer every year and month.
It is considered that when a new unit is acquired, the first year it will suffer a depreciation of approximately 30%, This is due to the payment of taxes such as ISAN, which is applied to new vehicles. It is estimated that its depreciation per month is close to 2%, but these percentages may be lower or higher, depending on the type of car, since there are commercial units that do not lose their value so much because their parts are more accessible and, in In case of repair, the workshop will have no difficulty in locating them.
On the other hand, there are luxurious or exclusive cars that devalue faster because of the limited market in terms of spare parts.
Are all cars stipulated as commercial value?
Most cars that are more than two years old are assigned their market value on the auto insurance policy. However, each insurance company has its own guidelines and it could vary, depending on the age of the unit, to assign them as Commercial, Invoice or Agreed, which are explained below.
What is the Invoice Value?
They are thus assigned to newly manufactured cars because they would be compensated with the price found on the title deed or the invoice of the car when it was purchased at a dealership.
The Invoice Value is recommended for units that are on credit because if an accident occurs with total losses to the vehicle, the insurer would be compensating the financier a greater amount of money for the car.
Likewise, it is advisable to purchase biannual policies, which protect for two years, as the unit would suffer less depreciation during that period of protection.
It is the maximum amount for which the insurance companies and the client agree to compensate the unit in the event of total loss of the car due to damages covered by the policy. For this option, an appraiser will review the car to determine the monetary amount for which the insurer will pay. It should be noted that this type of value is often used in classic or luxury cars.
Regardless of what type of value is used, you should consider the deductible.
What is the deductible and how does it apply to compensation?
The deductible is a percentage that the insured must pay since it is a way of sharing the risk with the company. And it is that if the insurance company paid everything, some people could abuse the use of insurance and driving caution could be diminished.
This percentage varies in each coverage and between companies: for Material Damage it is usually 5% and for Total Theft 10%. It is important to consider that some other additional protections such as those that cover modifications, tires or auto parts, also have a deductible.
The deductible is paid for both repair and compensation, but they work differently. In the repair of the car, the insured must pay 5% of the total value of the unit for the vehicle to be repaired and delivered. Which means that if the car has a commercial value of $ 120 thousand pesos, the customer must deliver six thousand pesos.
It is essential to consider it because some people believe that only the repair cost is charged, but it is not like that, it is the total cost of the car.
Now, if the vehicle has damages that make its restoration impossible, the insurance company will make the compensation of the car, but will deduct the deductible from the final payment. That is, the client will not have to pay anything but, for example, if the example of the $ 120 thousand pesos car is retaken, the user would be given around $ 114 thousand pesos.
Fortunately, there are insurance companies that eliminate the payment of the deductible or do not request it from the client in the first two events.
Why is Commercial Value in Auto Insurance suitable?
For some experts, the Commercial Value is ideal in terms of car repairs, as it would not be spent as much money considering that its value is less than when it was purchased.
But as mentioned before, it is not a good option if the car is on credit, since less money would be given in compensation and the driver may not yet finish paying the unit.
Where are the insurers that offer Commercial Value located?
All insurance companies have this option and to know if the company can insure with Invoice, Commercial or Agreed Value, it is important to ask the advisor what type of compensation will be assigned to the car.
Rastreator.mx in its insurance comparator, in addition to showing the prices, insured sums and guarantees of various companies, it also offers means of direct contact with each company to ask about these questions and, if you want to contract with the chosen company, what It can be done without intermediaries respecting the price shown, unless the payment is divided.
In the same quote you can also compare the deductibles of various coverages and those that eliminate the payment of this amount. In addition to displaying details of the Invoice or Commercial Value, in some cases, the Agreed Value is displayed.