Welcome to the topic “What Do You Pay In Case You Claim For Loss or Damage?“
Knowing that valuable property, such as a car, is well-insured gives the owner a sense of security and peace of mind. It provides financial protection in the event of a road accident, which can be very costly.
Accidents on the road might result in the loss or damage of the insured vehicle or another vehicle. In both circumstances, it is believed that, depending on the policy, the motor vehicle insurance will assist the automobile owner in shouldering or covering some or all of the costs.
Instead of lowering the danger of being involved in an accident, the driver may behave in bad faith and disregard traffic laws, believing that the insurance will cover the costs. A moral hazard is a term used to describe a careless driver’s actions.
To reduce the risk of moral hazard, insurance companies may use what is known as a “deductible.”
In the below post, we will discuss what exactly you have to pay in case you claim any loss or damage to your car.
Perla Insurance, one of the best car insurance companies in the Philippines, is here to answer any questions you may have about auto insurance. We shall answer these questions through these instructional and informative blog pieces. We also have our Perla Cares series of videos on YouTube in case you prefer a more concise version.
What Do You Pay In Case You Claim For Loss or Damage?
The amount you pay is called your participation fee. It consists of both deductible and depreciation charges.
When you file a claim for loss or damage with your automobile insurance company, you must pay a participation fee. This should be paid before the insurer covers the rest of the claim value. One of the conditions for most car insurance claims is the payment of a participation fee.
This deductible charge is applicable to all claims.
Depreciation on the other hand, only applies if there are parts that need to be replaced due to the accident. It is also only applicable to older vehicles. Both conditions of need for parts replacement and old vehicle have to be present in order for depreciation to apply.
Why Is There A Deductible?
The reason that there is a deductible is to eliminate small claims, which helps to keep premiums affordable. It is also to reduce the moral and morale hazard of the customer as they will have to share the cost of any claim.
Deductibles are always part of the participation fees and are the portion of the insured’s claim against the insurance company that the insured pays.
However, the deductible or participation cost will only be paid if the covered vehicle’s owner or driver is at fault in an accident.
If the innocent driver is proven not to be at fault following an investigation, the other car owner’s insurance will be required to return the amount made by the innocent driver. This is also known as the “subrogation” process.
A deductible obligates the owner or driver of a motor vehicle to exercise caution while operating the car and traveling the roads because they will be responsible for some, if not all, of the costs associated with any accidents or mishaps the insured car may encounter, especially if they are at fault.
If the total costs claimed against the insurance exceed the deductible, the insured would be responsible for the deductible, and the insurance company will cover the remainder. If the total claims are less than the deductible, the insurance company is not responsible, and the owner of the insured vehicle is responsible for all expenditures.
What is Depreciation?
Depreciation, however, only applies if there are parts that need to be replaced due to the accident and only to older vehicles.
There is depreciation for older cars because replacing the part with a new part enriches the customer. The only way to save on depreciation charges is to use surplus or used parts to replace the damaged part.
Basically, depreciation fees are calculated based on the car’s age and depreciated value. When your car is damaged, a portion of the charge will be utilized to purchase new parts.
The cost is based on the difference between the part’s worth at the time of purchase and the part’s value when it was damaged and needed to be replaced. Keep in mind that private and commercial car must be older than three years to be charged a depreciation fee and only if new parts are needed to repair the car.
Both amounts are stated in your policy.
Here is a similar video on this topic from our Perla Cares video series on Youtube:
What Is Total Loss?
When the expected cost of repairing a damaged car exceeds 70% the car’s coverage amount, it is considered a “total loss.”
Your car insurance provider will consider it a total loss if you get into an accident and the cost of repairs exceeds 70% of the vehicle’s coverage amount. Also, if your vehicle can’t be repaired at all, it’s also a total loss.
If your automobile is considered a total loss, you will be paid based on the fair market value of a similar unit at the time of the loss less the deductible.
Fortunately, Perla Insurance is here to provide you with the appropriate loss and damage coverage in case of a “total loss.”
As always, we at Perla Insurance sincerely care about our client’s well-being. We promise our customers to fulfill all their demands as the best insurance company in the Philippines. We provide nothing less than the best car insurance.
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As always, we at Perla Insurance sincerely care about our client’s well-being. We promise our customers to fulfill all their demands as the best insurance company in the Philippines. Perla Insurance provides nothing less than the best car insurance.
We not only strive for quality in service but also for the most benefits. We also want you get the most bang for your money and the most value from your investment.
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Also Read: What is the Standard Deductible and Depreciation Fee?