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'Better Car Replacement' insurance: What's the catch?

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CarInsurance.com

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Liberty Mutual says it will do more than simply replace your totaled vehicle. Demolish your ride, the company says, and it will put you in the seat of even a cooler car.

But you're not going to get a Lexus for the price of a Toyota.

The discount is called "Better Car Replacement" (Liberty Mutual even trademarked the name), and it apparently sweetens the standard coverage most car insurance companies already provide if your auto is ruined during an accident. Nobody else offers it, according to the insurer.

Instead of writing you a check for a similarly valued car, Liberty Mutual will buy you one that's a year newer with 15,000 fewer miles. The replacement vehicle would have to be in the same class and basic model type as the totaled one. Not a new Lexus, but not bad.

"At Liberty Mutual, we understand that accidents happen to even the most responsible drivers," the company's website says. "So if you have a 2007 vehicle with 35,000 miles on it and are involved in a total-loss accident," the company says, "Liberty Mutual will give you the money for a 2008 model with 20,000 miles on it."

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Their details: The car must be a total loss, you still have to pay the deductible, and the coverage isn't available in all states, or for leased vehicles or motorcycles.

Crunching the numbers

What's Better Car Replacement worth? A 2007 Ford Fusion SEL sedan with 35,000 miles in excellent condition fetches about $12,075 as a trade-in. A "Better Car Replacement" - a 2008 model with 20,000 miles - brings $14,375 at trade.

That extra cash would certainly make replacing the car a little more enjoyable.

Most insurers include some kind of "new car replacement" in their arsenal of car insurance discounts. Some will not give you the cash for a brand-new car if the original was more than six months old, while others have more flexible terms. Allstate, for example, offers a provision under its "Your Choice Auto" plan:

"If you total a brand-new car in the first three model years, you'll be able to get a new car, rather than just a check for the depreciated value," says spokesperson Stephanie Sheppard. That new car replacement is offered under a Gold or Platinum plan, which already cost 8 percent and 15 percent more, respectively, than a basic plan but include accident forgiveness and other benefits.

Liberty Mutual's coverage, though, can cover models even older than three years. The cost? It's certainly not free, but because the price is baked into a policy that also considers your age, address, make of car and more, a figure is hard to pin down. Liberty Mutual wouldn't offer a ballpark figure; an agent in Southern California says that adding "Better Car Replacement" can raise the price of a basic policy by as much as 40 percent.

Auto totaled? Now what?

Whether you pop for Better Car Replacement or not, you'll still have to come to grips with the post-accident appraisal process.

Here are steps to ensure you get the best settlement. They're recommended by several experts, including those at the Insurance Information Institute (III) and Automotive.com.

  1. What was the basic value before the accident? Insurers have an array of information sources to determine the value. Some are proprietary and can't be accessed, but a few are available, like independent pricing guides NADAguides.com, Kelly Blue Book and Edmunds.com. Take the time to find out how they value your car by factoring in the model, its year, mileage and general condition. Be as specific as possible and have supporting documentation on hand.
  2. Now add in any accessories that were installed by you or the dealer: an audio or navigation system, or some high-dollar chrome wheels. That's all part of the overall value - if you've got the receipts.
  3. Don't forget the incidentals. Those would be taxes, registration, title and any other fees. Your state's department of motor vehicles can tell you what those charges will be for a new car. Your car insurance is supposed to cover those fees, so make sure they're part of the settlement.
  4. Did you have a rental car after the accident? Check to see if that's part of your coverage; if so, confirm that you're being reimbursed.

Not satisfied? Now what?

If you're not happy with the insurer's offer, compare the appraiser's analysis with your own, referring to those documents you've arranged so carefully. Present your case and see if the payoff can be raised.

Michael Barry, the vice president of media relations for the III, says that some car insurance companies may have a complaint division that can help with a compromise. But if yours doesn't budge, there's another option. Barry notes that each state has a department of insurance that regulates all forms of coverage, including vehicle.

Go to your state's website and see how to challenge the settlement. Most states have consumer advocates that can give you information and advice on filing a complaint.

If you're still unhappy, Barry says an arbitrator may have to get involved. Your insurer may suggest one, or you can get your own at the American Arbitration Association.

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