Full Replacement Warranty

stovetop wrote: ↑ I purchased a new car for about $32,000 last year and bought both extended warranty and the new vehicle/replacement warranty as well which was an extra $2XXX or so which is valid for 8 years.
The rep said that if my car gets written off at any point in time, they will pay back the full purchase price of my vehicle (minus taxes, etc).

Does that mean if I crash my car in the 8th year that I could potentially get $32,000 back? Something doesn't sound right because insurance companies are there to make money.

stovetop wrote: ↑ I purchased a new car for about $32,000 last year and bought both extended warranty and the new vehicle/replacement warranty as well which was an extra $2XXX or so which is valid for 8 years.
The rep said that if my car gets written off at any point in time, they will pay back the full purchase price of my vehicle (minus taxes, etc).

Does that mean if I crash my car in the 8th year that I could potentially get $32,000 back? Something doesn't sound right because insurance companies are there to make money.

i6s1 wrote: ↑ Yeah, that's why it's so expensive. Policies like this are fraud magnets, especially if they cover theft/arson. So a huge portion of the cost isn't really coverage against legitimate loss, it's coverage against the inevitable fraud.

But if it's $2000+ on a $32000 vehicle, then as long as less than one in sixteen vehicles are total losses within 8 years, then the insurance company comes out ahead. And that's without even considering that this insurance doesn't even cover the total cost of the vehicle, just the difference between new price and current price. Let's say the average write-off happens 5 years into the 8 year policy, (fraud and the lower writeoff threshold will slant this towards older vehicles) and the vehicle retains 40% of it's original value after 5 years. They're paying $19k per writeoff so they make money as long as less than one in ten vehicles is written off.

Now... just for interests sake, let's ballpark the real chances of writing off a vehicle:
-33m cars in Canada
http://www.statcan.gc.ca/tables-tableau ... 4a-eng.htm
-150k collisions
https://www.insurancehotline.com/my-veh ... -now-what/
-Looks like around half of claims are vehicles less then 10 years old, unfortunately an American source now - but just looking for ballpark figures... have to assume Canadian numbers are similar.
http://www.cccis.com/whats-driving-tota ... frequency/
-Same source looks like a bit over 10% of all claims on vehicles under 8 years old are total loss. Call it 15%.
-We can presume that vehicles of any given age are involved in collision numbers proportional to their numbers, ie let's assume that the accident rate is the same for 2 year old vehicles as 10 year old vehicles

150k collision of 33m cars means that one out of every 220 cars are involved in a collision each year.
If 15% of those claims are total loss, that's about 1 in 7,
so around 1 in 1500 cars under 8 years is total loss each year
Multiply that by 8 to cover the 8 years of the term, and you get 8 out of 1500
or about 1 out of every 190 cars will be totaled over it's first 8 years
So say that the average insured car is $32000 and the average premium is $2000 and the average payout is $19000,
Insuring 190 cars makes them $380k in revenue and pays out $19000 in claims

Or put another way, this policy is 5% value and 95% sales commission, admin, fraud expenses profit, etc.

Anyone see any math errors, bad reasoning, or have better sources so I can rely less on guesswork?

cellsell wrote: ↑ so is that warranty is from the dealer? manufacture? or insurance?

Maybe BC is different from Ontario. We bought that with all the new cars we purchase. In Ontario, or my policy, it is upto 5 years. So the first 1-3 years, it is like around $100 each year. but then they start to increase on the 4th and 5th years. I remember there was a car I had on the 4th year renewal it got charged for $4xx for that coverage. I traded that in before the 5th renewal so I won't know how much they charge.

I have used that coverage once.. so what my insurance company did was they would contact different dealers and found one to replace it. They would tell you either you can go to that dealer to get the car and they take care of the bill, or they will cut you a cheque so you can buy another model. I picked the second option.

stovetop wrote: ↑ yeah, that's basically how it works: they pay the difference btw what ICBC won't cover and the cost of a new similar vehicle. But then what stops me from "crashing" the car into a barrier to get myself a new car at the 8 year mark (other than ethics/my conscience, etc).