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Can my insurance company only pay for used parts?

 

A - First of all, unless your policy has a special endorsement (more on that later), virtually all personal auto insurance policies pay for damage to vehicles on an “actual cash value” basis, not “replacement cost.” 

 

What this means is that your insurance company owes you a used, five-year-old fender, and they will find it for you at the local auto recycling center. (We used to call them “junk yards.”)  

 

However, you still have the option to have your body shop order a new fender directly from the manufacturer and have the shop install that fender.   You will need to pay the difference in cost between the used fender and the new fender.   Insurance companies call this difference “betterment,” as in reality you will be in a better situation after the accident because you have a brand new fender instead of the five year old fender. The bottom line is that insurance policies won’t pay for the “betterment.”

 

So, in answer to the question, yes, this is standard operating procedure, and generally, no, you’re probably not getting a bad deal. 

 

That being said, there may be a couple of ways around this, depending on your situation.

 

While most auto insurance policies are all about the same, available endorsements will vary. Some insurance companies offer special endorsements that provide “replacement cost” coverage on vehicles purchased as “new.” The endorsement may also be available in certain circumstances on some “used” vehicles. Some endorsements actually replace your vehicle with a new one if it is damaged or totaled within the first year of ownership. Endorsement provisions vary from company to company.  You need to visit with your insurance company or agent to check availability with your company.  As vehicles depreciate quite quickly, you may find that this endorsement provides you with a better comfort zone in terms of your coverage. Of course, you need to weigh the cost of the endorsement against potential for a serious loss on a new vehicle.  

 

Many insurance companies offer to replace damaged parts on your vehicle with “aftermarket crash parts.”   These are new parts, but made by manufacturers other than the original equipment manufacturer (OEM) such as GM, Ford or Chrysler.   As an incentive to promote the use of these parts, many insurance companies will guarantee the parts’ performance for as long as you own the vehicle.   The use of these “aftermarket” parts saves insurance companies millions of dollars each year in claims expense. 

 

Finally, some insurance companies offer policies that provide new OEM parts on damaged vehicles that are within a certain age, such as three years. You need to check with your insurance company or agent to see if your company has this coverage available, and the additional cost.