Content courtesy from the Economical Insurance website.
Being involved in a collision can be overwhelming — so we’re here to make sure complicated insurance terms don’t cause you any additional stress.
Here’s what you need to know if you’re asked to pay a betterment charge during your car insurance claim.
What is a betterment charge?
The purpose of any insurance policy is to put you back into the same financial position you were in before a loss, no better and no worse. When you’re making a car insurance claim, you’re expected to pay a betterment charge when the repairs to your vehicle will put it in better condition than it was in before the collision. But have no fear — you’ll be notified about any betterment fees before the repair is completed, so you shouldn’t be in for any surprises during the claim process.
How do betterment charges work?
Generally speaking, car insurance policies are set up to cover the actual cash value of a vehicle and its parts. When your vehicle is damaged in a collision, your insurance company will cover the costs to repair it. (However, if the repairs will cost more than the actual cash value of your vehicle, your insurance company will pay you the actual cash value instead.)
Over time, vehicles and their parts do depreciate. Generally speaking, if parts can’t be repaired, they will be replaced with parts that are of like kind and quality. This can mean repairs are completed with new original or aftermarket parts, or used rebuilt or refurbished parts. If a suitable used part is not available, repairing your vehicle with a brand new part will put it in better condition than it was in before the collision, so you’ll need to pay for the upgrade.
Here are some examples of how betterment charges might work in real life:
1. Your tires are getting worn out and you’re planning to replace them within the next couple of months — but, before you do, you get into a collision and your old tires are damaged. Your insurance company will likely require you to replace the damaged tires with brand new ones, which will put your vehicle in better condition than it was in before the collision (and it’ll put you in a better financial situation since you won’t have to pay to replace your tires as you had planned). As a result, you’ll be expected to pay the difference in cost for the betterment to your vehicle.
2. You’re in a parking lot and another driver hits and dents your passenger door when they pull into the parking spot beside you. Your door can’t be repaired, so it needs to be replaced entirely. You know your door was starting to get rusty around the edges, but the new replacement door is in perfect shape, putting your vehicle into better condition than it was in before the parking lot mishap (and likely increasing your vehicle’s value) — so you’ll need to pay for this improvement in the form of a betterment charge.
Note: If you have the repair completed by one of your insurance company’s certified repair facilities or preferred vendors, it will come with some kind of warranty, so you can be confident in the quality of the repair. A warranty is especially valuable if your vehicle is being repaired with used parts.
Will I still have to pay a betterment charge if the collision wasn’t my fault?
Regardless of who is at fault for the collision, you’ll still need to pay for any betterments to your vehicle during the repair process. Because insurance is designed to put you back into the same financial position you were in prior to a loss, the person who is at fault for the accident wouldn’t be responsible for paying for brand new parts to repair your five-year-old vehicle, if that’s what’s required. Even if you aren’t at fault for the collision, replacing damaged parts with brand new ones would still put your vehicle in better condition than it was in before the loss, so you’ll still need to pay a betterment charge.
The fine print
Betterment charges are determined on a case-by-case basis and vary by insurance company, the age and condition of your vehicle, the work that needs to be done, and several other factors. If you’re wondering about a specific charge you’ve been asked to pay, you’ll need to talk to your insurance broker or the adjuster who is supporting with your claim.