Yesterday, we got a phone call from a stranger. He wanted to ask if the decision given to him by Fortune Insurance after a Total loss was fair or not. Here is the case:
Mr. Insurance customer insured his 2004 Volvo S60 for P1,500,000. He got into
a major accident and Fortune Insurance declared it a Total Loss.
He also asked if he can get his Mags back worth 100K.
Reasons for declaring a Total Loss: 1. The car is no longer usable and repairable. 2. The total damage reaches 50% of the sum insured.
Mr. Insurance customer said that Fortune Insurance offered to pay him P800,000.
The question is why did Fortune Insurance offered him 800,000 and not the sum insured of 1,500,000?
IE: We saw a lot of loop holes in this transaction. 1. The Fair Market Value of 1,500,000. Yes, the value is correct. Because coming from its brand new price, insurance practice is to just depreciate 10-15% from its original price, thus arriving at that amount approximately from the 6years old Volvo S60. Mostly,if the car is mortgaged.
Unfortunately, the actual value of 2004 Volvo S60 in the metropolis is just around 800,000, meaning Fortune Insurance can buy you a same model, working properly at that price.
Argument: Why did FI accepted the premium payable at the coverage of 1.5M and did not inform Mr. Customer that he can just insure it at 800K?
Again, the 1,5M coverage is correct mostly if the car is mortgaged. If the car is not
mortgaged, you may opt to insure your VOLVO S60 at 800K but there is a dilemma, the price of repair and parts of a Volvo is expensive, so if ever you encountered an accident even just a minor one and your cost of repair reaches 400K (easily), the insurance will declare it a total loss.
We are also not informed if the car is mortgaged, we don’t know if 800k offer is after the insurance company paid the mortgaging bank.
2. The insurance customer changed his mags without telling his insurance company. The insurance company should know any alterations in your car because by default, they will just refer to its original accessories. Now, if you want to know if you can get your mags back? i think its possible, you just have to replace it with the original mags if you still have it.
3. The Fair Market Value and the actual value is somehow accurate for the common brands like Toyotas, Nissans, Hondas and so on and has a big discrepancy on big brands such as BMWs, Porsches, Volvos, Audis, Lexus’ and Mercedes Benzes.
Mr. Insurance customer should not be worried with the offer. I believe that the problem belies on the economic status of the Country, very deep. Because if we have a bigger buying market for the Volvos then the FMV and the actual value wont be that big.
Disclaimer: The story is based from an inquiry by a stranger who seeks a 2nd opinion. The results of the decision should not be based on our opinion. We are also not affiliated with Fortune Insurance. We are just giving thoughts and opinions based on our understanding, learnings and experiences.