This section explains how insurers determine whether to repair or replace a vehicle after a car accident. This section applies if you are not responsible for the accident, or if you have taken out either collision or replacement value insurance. If you are responsible for the accident and you are only insured against civil liability, you will be required to pay for the damages to your vehicle.
What Is Replacement Value?
Replacement value coverage offers additional protection against the depreciation of your vehicle or its parts, if it is replaced or repaired. The following explanations provide more details on replacement value as it pertains to the repair or replacement of a car after an accident.
How Does an Insurer Decide if a Car Should Be Repaired or Replaced?
If the cost of repairs as estimated by the insurer surpasses the value of your vehicle at the moment of the accident, your vehicle will have to be replaced. The same applies if your car is declared a total loss. You will receive financial compensation equal to the market value of your vehicle at the moment of the accident.
- If you have replacement value – With 43D replacement value, you will receive cash compensation equivalent to the value of a new similar vehicle. With 43E replacement value, your vehicle will be replaced by a new similar vehicle.
If your insurer determines that your vehicle can be restored to the condition it was in prior to the accident, your vehicle will be repaired. Your insurer is required to ensure that your vehicle is fully safe after the repairs are completed, but it does retain the right to have the repairs carried out using used or refurbished parts. This is due to the fact that new vehicles quickly lose their initial value.
- If you have replacement value – If you have 43A replacement value coverage, your vehicle will be repaired using new parts. With 43B coverage, your vehicle will be repaired with new parts, but only if used parts cannot be found.
In the event of a car accident, the repair or replacement of a vehicle carried out with a more recent product constitutes an improvement to your vehicle. Normally, the insurer must bill you for this improvement. However, with replacement value coverage, this improvement is not billed to you.