Personal Auto PolicyQuestion 401 of 531
An insured's car is destroyed in a collision. Its actual cash value is $6,400, the collision deductible is $500, and the wreck still has scrap value. The insurer:
a.Pays $5,900 and may keep the salvage
b.Pays $6,400 and leaves the wreck with the insured
c.Pays $5,900 and bills the insured for the towing
d.Pays the cost of a comparable new car
Explanation
Physical damage losses are settled at actual cash value, which is replacement cost less depreciation, and the deductible comes off: $6,400 less $500 leaves $5,900. When it pays a total loss the insurer may keep the damaged property, which is how the scrap value is accounted for. Replacement with a brand-new vehicle is not what the unendorsed policy promises.
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