What Are Direct Repair Programs and Generic Auto Parts?

What Are Direct Repair Programs and Generic Auto Parts?

Helpful Auto Insurance Q&A That Will Help You To Get Better Insurance Policy:

Auto insurance is a highly competitive business. To help policyholders with the auto repair process, some insurance companies offer direct repair programs so that their customers have easy access to a recommended body shop. Some also offer one-stop shopping where a damaged car can get dropped off and an adjuster handles the claim, the car is fixed and often a replacement rental car is provided.  When a car is damaged, an auto repair shop may provide a choice between original equipment manufacturer (OEM) and generic replacement parts. When navigating the claims process, it is important to understand the different options, and what choices are available to you under your policy. These frequently asked consumer questions can help guide you through the process.

Q. What is a Direct Repair Program?

A. A Direct Repair Program (DRP) is a network of auto repair shops and dealerships approved by an insurer.

Q. Why do auto insurers offer Direct Repair Programs? 

A. DRPs help auto insurers provide their customers with quality repairs at a reasonable cost. 

Q. Are DRP auto repair shops reliable?

Auto repair shops and dealerships that participate in the program are carefully vetted by insurers to ensure they provide quality repairs and service to policyholders. Insurers also offer customers a lifetime guarantee on workmanship decides to use the DRP shops.

Q. May I use an auto repair shop of my choice for insured repairs?

A. Yes. Consumers have the right to go to the auto shop of their choice. If their insurance company offers a direct repair program, they do not have to use one of their auto repair programs. Policyholders should talk to their insurance company about their specific procedures.

Q. What are generic crash parts?

A. There are two types of crash parts: original equipment manufacturer (OEM) parts, which are supplied by auto manufacturers, which sell them under their own name; and generic, or aftermarket, crash parts. Generic parts are frequently produced in the same factory as the OEM parts, but are also produced by independent manufacturers. They are generally limited to the cosmetic parts of the car that form the outside “skin” frequently damaged in an auto crash such as fenders, hoods and door panels.

Q. Are generic parts safe?

A. Yes. Studies show that these exterior generic parts do not compromise the safety of a vehicle. Auto insurers only want safe cars put back on the road—not only will they be insuring these cars, they are also committed to auto and highway safety. In addition, the independent, non-profit organization Certified Automotive Parts Association (CAPA) rigorously inspects generic auto parts and guarantees that their quality meets its standards.

Q. Do I have a choice of generic or OEM parts?

Some auto insurance companies offer their policyholders a choice between generic and OEM parts. Some policies actually specify that only original equipment manufacturer parts must be used for repairs, while others require this only when repairing recent model cars. A few states mandate that insurance companies must offer generic parts when they exist. These requirements and options will be included in your auto policy—read it carefully and speak with an insurance professional to best understand your coverage.

Q. Can my insurance company require me to use certain types of auto repair parts?

A. No. Insurance companies cannot require a policyholder to use only certain kinds of auto repair parts. However, if the company’s rates are based on using a certain type of part, the insurer can ask you to pay the difference if the part you prefer is more expensive.

Q. What if the parts don’t fit?

A. A generic part is no less likely to fit a vehicle than an OEM part. In the unlikely event that either type of part does not fit the vehicle, the insurance company will often pay to replace the part at no extra cost.

Q. How can I find out if generic parts are used in repairing my car?

A. Many states require that estimates prepared by auto body shops disclose whether the repair job will use generic parts. Insurers are also required to disclose that they are using parts “at least equal in the kind and quality in terms of fit, quality, and performance to the original manufacturer parts they are replacing.” If in doubt, ask your auto body repair specialist what types of parts are being installed.

Q. Will the use of generic parts reduce the value of my car?

A. No. Diminished value could occur if your vehicle has a significant collision history.  However your car would not be diminished further in value by the use of generic parts. 

Q. What if I lease my car?

A. Lease agreements clearly spell out what type of parts may or may not be used when a car is repaired.

Q. What are the benefits of using generic parts?

A. There are many benefits to using generic parts. First, they are 26 to 50 percent less expensive than OEM parts and often have longer warranties. The introduction of aftermarket parts has also forced down the price of OEM parts by creating competition in the marketplace.

What should I do if I am having trouble settling my claim?

What should I do if I am having trouble settling my claim?

Tips On How To Settle Insurance Claim:

If you are not satisfied with how your claim is being handled, there are steps you can take.

1. Let your agent or company representative know that you are unhappy.
   If the agant or representative is unable to solve your problem, get the name and phone number of the head of the insurer's claims department. Your insurance company may also have a consumer complaint department that can help.
2. Be prepared to support your case.
   Send documents and a letter explaining why you are not satisfied and make sure you have the figures to back up your argument. Be certain to include your address, claim number, day and evening phone numbers and any other important identifying information.
3. Review your auto insurance policy.
   Most companies offer either arbitration or appraisal services to help settle differences and disputes. Your insurance policy will explain these options.
4. Contact your state insurance department.
   Explain the reasons for the disagreement to a consumer services representative at the department.
5. Contact an arbitrator to hear your case.
   An independent arbitrator with experience in insurance matters can decide if the settlement you were offered is fair. Your insurance company may suggest an arbitrator or you can get your own from theAmerican Arbitration Association at 212-484-4000.
6. Consult an attorney.
   As a last resort, consult an attorney who specializes in auto insurance. Each state’s bar association offers a free legal referral service, which will give you names of qualified candidates. Attorneys work either on an hourly rate or on a contingency basis, depending on the type of case. Get the attorney's fee structure in writing. You can remain current on the progress of your claim by requesting that you receive copies from your attorney of all correspondence. Your attorney must have your agreement before committing to any settlement.

After your claim has been settled, take time to re-evaluate your auto insurance coverage to make sure you have adequate protection to cover you against any future damage or liability claims.

What are my rights when filing a claim?

What are my rights when filing a claim?

Know Your Basic Rights To File A Claim For Your Insurance:

As a policyholder, you have certain rights. Every state has laws protecting consumers. Your policy is a legal contract between you and your insurer. It defines your rights and obligations as well as the rights and obligations of the insurance company.

If you have any questions regarding your rights under the policy, talk to your insurance agent or company representative. You may also contact your state insurance department, state attorney general's office, or your state's consumer affairs department.

If I file a claim, will my premium go up?

If I file a claim, will my premium go up?

The Insurance Premium Fact:

You may be reluctant to file a claim because you fear that your premium will go up or your insurance will be canceled. Practices vary from company to company. In general, an insurer will increase your premium by specific percentages for each chargeable claim made against your policy above a specific dollar amount. A chargeable claim is one the insurer considers primarily your fault. The percentages and ceilings vary from company to company. These increases generally stay on your premium for three years following the claim.

Your company may also decide not to renew your policy if your driving record gets markedly worse or you have several accidents. Different insurers have different rules about what constitutes an unacceptably bad driving record. But some accidents, such as those caused by drunk driving, will probably trigger a nonrenewal from virtually every insurance company.

If you have an accident but don‘t report it to your insurer, you are taking a risk, even if the damage seems minor. If the other driver sues you weeks or months later, your failure to report the accident might cause your insurer to refuse to honor the policy. And even if they do honor the policy, the delay will certainly make it harder for the insurer to gather evidence to represent you.

Understanding Your Insurance Deductible

Understanding Your Insurance Deductible

Understanding the role deductibles play when insuring a car or a home is an important part of getting the most out of your insurance policy.

 

A deductible is basically the amount “deducted” from an insured loss. Deductibles have been an essential part of the insurance contract for many years and represent a sharing of the risk between the insurance company and the policyholder. When repairing your home or replacing personal possessions, the amount of the deductible would come out of your own pocket.

 

A deductible can be either a specific dollar amount or a percentage of the total amount of insurance on a policy. Generally speaking, the larger the deductible, the less a consumer pays in premiums for an insurance policy. Deductible amounts can be found on the declarations (or front) page of standard homeowners and auto insurance policies.

 

Here is how it works: if you have a $500 “dollar deductible,” that $500 would be deducted from your claim. So, if your insurance company has determined that you have an insured loss worth $10,000 you would receive a claims check for $9,500.

 

Percentage deductibles are calculated differently. They are based on a percentage of the home’s insured value. So if your house is insured for $100,000 and your insurance policy has a 2 percent deductible, $2,000 would be deducted from the amount you are reimbursed on a claim. In the event of the $10,000 insurance loss, you would be paid $8,000.

 

Deductibles in many parts of the country have been going up. In hurricane prone states, where there is a greater risk of a major catastrophe, special deductibles may apply for homeowners insurance claims when the cause of damage is attributable to a hurricane. These deductibles are generally higher and may take the form of a percentage of the policy limits.

 

Deductibles for property damage work differently than, for example, a typical health insurance policy where there a single annual deductible for the policy. With an auto or homeowners insurance policy, the deductible applies each time you file a claim. The one major exception to this is in Florida, where hurricane deductibles specifically are applied per season rather than for each storm.

 

Hurricane deductibles have helped to make more private insurance coverage available in coastal communities at a lower price. This means more choice for consumers. So, consumers who reside in states where competitive markets exist can often shop around for coverage and usually find that they have a selection of insurance policies to pick from that offer a variety of different premiums, coverages and deductibles.

 

Here are some other important things to know about deductibles:

Raising Your Deductible Can Save Money

One of the best ways to save money on a homeowners or auto insurance policy is to raise the deductible. For example, for auto insurance, increasing the dollar deductible from $200 to $500 can reduce collision and comprehensive coverage premium costs by 15 to 30 percent. Going to a $1,000 deductible can save you 40 percent or more. But, remember that if you have a loss, this amount will be deducted from your insurance claim and that you will be responsible for the difference.

Deductibles Differ by Company and by State

Insurance is state regulated. And insurance companies must follow strict state laws. This also applies to the way deductibles are incorporated into the language of a policy, and how they are implemented. In many states a range of deductibles can be found. So if you are shopping for insurance, you should always ask about deductibles when comparing policies. For homeowners or renters insurance policies, most insurers offer a minimum $500 dollar deductible. However, raising the deductible to $1,000 or more can save upwards of 20 percent on the cost of an insurance policy.

Deductibles Do Not Apply to Liability Claims

There are generally no deductibles for the liability portion of a homeowners or auto insurance policy. Instead, the deductibles apply to property damage. So, on in an auto policy, there is a deductible for the optional comprehensive or collision coverage, but not for the liability portion. And, in a homeowners policy, deductibles apply to damage to the structure of the house or personal possessions but not if a homeowner is sued or a medical claim is made by someone injured in the home.

Flood Insurance Offers a Range of Deductibles

Flooding is not covered by standard homeowners insurance policies but is available from the National Flood Insurance Program (NFIP) and from some private insurance companies. The NFIP offers separate policies for the structure of your home and for your personal possessions, along with a variety of deductibles. You can choose one deductible for the structure and another for the contents of your home. Mortgage companies, however, may require that your deductible be under a certain amount. Flood damage to a car is covered by the optional comprehensive portion of an auto insurance policy. 

 

Percentage Deductibles Apply to Earthquakes, Hurricanes and Hail

 

• Earthquakes: Deductibles for earthquake coverage can range anywhere from 2 percent to 20 percent of the replacement value of the structure. Insurers in states like Washington, Nevada and Utah, with higher than average risk of earthquakes, often set minimum deductibles at around 10 percent. In most cases, consumers can get higher deductibles to save money on earthquake premiums.
  California residents also can purchase earthquake insurance through the California Earthquake Authority (CEA). The standard CEA policy includes a deductible that is 15 percent of the replacement cost of the home. The basic policy covers only the house (other structures such as garages, pools, etc. are not covered). Personal possessions are covered up to $5,000 and “loss of use” expenses, the additional cost of living elsewhere while repairs are made to the home, are covered up to $1,500. Recognizing that some people want more comprehensive coverage, the CEA also offers a 10 percent deductible for other structures, personal items coverage up to $100,000 and $15,000 in “loss of use” coverage.
• Hurricanes and Hail: There are two kinds of wind damage deductibles: hurricane deductibles, which apply to damage solely from hurricanes; and windstorm or wind/hail deductibles, which apply to any kind of wind damage. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity in terms of wind speed. Due to these differences, homeowners should check their policies and speak to their agent or insurance company to learn exactly how their particular hurricane deductible works. In some states, policyholders have the option of paying a higher premium in return for a traditional dollar deductible. However, in high-risk coastal areas insurers may not offer this option, instead making the percentage deductible mandatory.
•  Hurricane Deductibles Are Not New: The first hurricane deductibles were introduced into policies over 20 years ago. After Hurricane Hugo hit South Carolina in 1989 and Hurricane Andrew hit Florida in 1992, insurers realized they were far more vulnerable to huge weather-related losses than they had previously thought. In order to be able to continue getting reinsurance (basically insurance for insurers), and thus continue to offer homeowners insurance in high-risk areas it became necessary to require policyholders to share some of the cost by including hurricane deductibles in policies. 

Consider Percentage Deductibles When Purchasing a Home

When looking for a new home, it is important to consider the cost of insurance. Coastal properties and other locations at higher risk for a natural disastermay cost more to insure than other locations, and you must add to that a separate deductible for earthquake or hurricane damage. Remember, you will be paying for insurance the entire time you live in your home—if you are a prospective buyer and feel you cannot afford the insurance, then it may be time to consider a different home.

Will My Insurance Pay for a Loss In My Car’s Value if it Is Damaged In a Collision?

Will My Insurance Pay for a Loss In My Car’s Value if it Is Damaged In a Collision?

Diminished Value Explained

What Is Diminished Value?

After a vehicle has been involved in a major accident and has been repaired, depending on its age and condition, the resale value may be less than if it had not been damaged. In other words, potential buyers may believe the repairs, even if they meet the highest standards, have not restored the vehicle to its pre-accident condition and will be unwilling to pay as much for it as a result. This perceived financial loss is known asdiminished value.

 

(In fact, older model cars that have been damaged and repaired may actually be worth more because new parts have been substituted for many of the old parts.)

 

Diminished value claims generally apply to auto insurance policies but can also pertain to a property insurance policy covering real estate. 

 

Will My Insurance Policy Pay for Diminished Value?

An insurance policy is a legal document, a contract between the policyholder and his or her insurance company. Whether an insurer can be expected to compensate an auto insurance policyholder for diminished value depends on state legislation or state court rulings and who was to blame for the accident.

 

What If an Accident Is My Fault?

Suppose you, as the policyholder, are backing out of a parking lot and ram the car into a lamppost. In most cases, you would not be compensated for diminished value. If you have purchased the standard, optional collision coverage, your insurer will pay for repairs to the car, minus the deductible. Except in a very few states, the language in the collision section of the standard auto insurance policy clearly excludes coverage for diminished value. This exclusion has been affirmed by courts in many states.

 

What If an Accident Was Clearly Caused by the Negligence of Another Driver?

In all states except Michigan, if an accident is the fault of another driver, you would receive compensation for diminished value because legally the third party has an obligation to make the victim of the accident “whole” again; in other words, to restore the victim’s car to its pre-accident fair market value. This means repairing the vehicle and paying the difference in the car’s resale value before and after the accident, the cost of which is usually covered by the at-fault driver’s liability insurance policy.

 

If the at-fault driver is uninsured and cannot pay for repairs, receipt of payment will depend on whether you have purchased uninsured motorist’s coverage, the portion of an insurance policy that protects a policyholder against losses due to uninsured and hit-and-run drivers. About half of the states allow recovery for diminished value under this coverage. (Drivers are required to purchase a liability insurance policy in all states except New Hampshire, which only requires drivers to have sufficient financial assets to pay for whatever harm they may cause. Some states, including New Hampshire, also mandate the purchase of uninsured motorist coverage.)

 

When the law allows the policyholder to recover the amount by which the car’s value has been diminished, whether under the at-fault driver’s liability policy or under the policyholder’s own uninsured motorist or collision coverage, it is always the policyholder’s responsibility to prove the repaired vehicle is worth less than before the accident. Payments may be reduced by the degree to which the policyholder was to blame for the accident. 

 

State Court Rulings

In most states the language in the collision section of the standard auto insurance policy clearly excludes coverage for diminished value. This exclusion has been affirmed by courts in many states. However, a landmark decision in a Georgia case found coverage for diminished value.

 

The oft-cited case is State Farm Mutual Automobile Insurance Company v. Mabry, decided by the Georgia Supreme Court in 2001, in which the court said the insurance company not only has a contractual obligation to pay for diminution in value in first-party physical damage claims but also that it has a responsibility to establish a procedure for handling diminution of value claims. In response, State Farm developed a formula (“17c”) by which diminished value claims could be measured. Since then, insurers have used this as the basis for creating their own formulas.   

 

In 2011 the Georgia Supreme Court was asked to decide whether the decision in State Farm v. Mabry applied to property, in this case damage to a building. In May 2012, in the case Royal Capital Development v. Maryland Casualty Company, the high court said that “Mabry is not limited by the type of property insured, but rather speaks generally to the measure of damages an insurer is obligated to pay.” In Georgia, therefore, a policyholder’s property insurance policy covers the diminished value of the damaged real estate in addition to the cost of repair.

 

Resources

Property Casualty Insurers Association of America (PCI)

INSURANCE:Determining Your Car's Value and Cost of Repair

Determining Your Car's Value and Cost of Repair

There are several standard guidelines for determining the value of your car for insurance purposes. You and your insurer can refer to one of the books that list the depreciated value of all new and used cars. One of these books is published by the National Association of Automobile Dealersanother is published by Kelley Blue Book.

When you file your claim, your insurance company will refer you to a claims adjuster. The adjuster will verify the loss and determine what it will cost to repair the car. The adjuster’s estimate can serve as a benchmark to which to compare your own mechanic’s estimate.

No good adjuster or insurance company will expect you to sign an agreement accepting the insurer’s estimate as the total claim payment until you’ve established, to your own satisfaction, that it will cover the cost of repair. The insurer will expect you to get your own estimate from your mechanic, garage or car dealer. Don’t allow yourself to feel pressured into accepting the insurer’s estimate of repair costs without getting at least one estimate of your own.

Your insurance company can’t require you to have repairs done at a particular shop. But they can insist that you get more than one estimate for the work to be done on your car. Just as you want to make sure that your car is adequately repaired, the insurer wants to make sure it doesn’t pay a grossly inflated repair bill.

Don’t be surprised if your insurance company opts to pay for the lowest bid. You don’t have to accept that bid if you believe the low bid won’t adequately repair your car. Don’t hesitate to argue with the adjuster if you really believe his repair estimate is too low based on what your mechanic has told you.

One factor that could reduce the amount of your claim for a repair job is what insurance companies call betterment. If your old car is repaired with brand-new parts, your insurer may argue that the repairs have actually enhanced the car’s value and therefore they can legitimately reduce your claim by the difference between a used part and a new one.

It is up to your insurer to decide whether to pay for repairing your car or to declare it a total loss and pay you its book value. Most standard auto policies will not pay to repair a vehicle if the repairs cost more than the cash value assigned to the car. There won’t be any dispute about whether to repair the car if it was completely totaled. But you may argue about what the pieces of the car were worth when they were assembled as a car. For you to get a settlement higher than the book value of your car’s make and model, you will have to submit evidence such as mileage records, service history and affidavits from mechanics to show that your car was worth more. You’re entitled to the market price of the car you just lost. You shouldn’t get more or less than what you are due.