Automotive

Full Replacement Warranty

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  • Feb 20th, 2018 12:20 pm
[OP]
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Dec 3, 2006
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Vancouver, BC

Full Replacement Warranty

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.
12 replies
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Mar 1, 2005
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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.
Read the fine print.
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Jun 20, 2015
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Not that the sales rep will lie to you just get the sale... but I would still check the fine print just to be safe.
Good luck!
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Jan 19, 2008
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you mean you signed it and paid $2000 but you don't know what it covers? Doesn't sound smart
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Apr 5, 2016
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Pretty sure the new car replacement does not cover the full 8 years. Mostly likely capped at 4 but you have to read the warranty disclosure.
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Apr 11, 2012
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Probably prorated or replaced with similar age
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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.
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?
[OP]
Deal Addict
Dec 3, 2006
2916 posts
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Vancouver, BC
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?
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).
Sr. Member
Aug 4, 2004
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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.
[OP]
Deal Addict
Dec 3, 2006
2916 posts
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Vancouver, BC
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.
it's from a third party insurance company called Motomaxx. They also pay part of your deductible ($250) if you are in an accident but it's not a write off and they will do this unlimited times.
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HOW THE POLICY WORKS
Motomaxx will protect your investment on your NEW or USED Vehicle.

Coverage for up to 8 years (96 months).

Coverage is available on new and used vehicles up to TEN model years and newer.

This plan is 100% insured and fully underwritten by Intact Insurance, the largest insurer in Canada.

THINGS TO CONSIDER
What will my primary insurance pay out?

If I am leasing and have a total loss what happens?

Will I be stuck owing the bank money if my insurance payout doesn't cover the amount I owe on my car loan?

DEDUCTIBLE REIMBURSEMENT
Motomaxx reimburses your Auto insurance deductible every time you make a claim, no limit during policy period!

In event of total loss up to $500 of deductible will be covered.

In event of partial loss I.E. windshield, fender bender, ETC. up to $250 of deductible will be reimbursed with no limit on the frequency of claims.

HOW IT WORKS: NEW VEHICLE

HOW IT WORKS: USED VEHICLE

NEW VEHICLE BENEFITS
When your vehicle is written off by the underlying insurance company: Depreciation kicks in, client receives what the book value is at that time.

Motomaxx Policy pays the diff erence between the depreciated amount received from underlying auto insurance and the purchase price of a new current model year vehicle of similar make and model.

OLDER VEHICLE ELIGIBILITY
Motomax pays the diff erence between the depreciated amount you receive from your underlying auto insurance and the original purchase price Plus 5% per year For each year you have owned the vehicle.

ADDITIONAL BONUSES
New and Used policies will include all sales taxes on the purchase of replacement vehicle.
New Vehicles - covers OEM (Original Equipment from Manufacture) Parts. This means in the first 3 years if you have a partial loss claim the only parts that can be used are brand new parts. If you purchase a New Vehicle Motomaxx will pay the difference between your underline insurance using after market parts and cover the cost difference to use OEM parts!


Bolded for your pleasure is that if your deductible is say $5000, you only getting pennies back.
If you need additional coverage like this, you shouldn't have a car. You're premiums would be through the roof in Ontario. This is basically secondary insurance coverage.
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Jun 17, 2013
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sounds like what my insurance offered for roughly 20-30$ a year for 5 years for.

you got bamboozled.
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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).
There is the risk of hurting yourself in the staged collision.

And this is why the ICBC version of the policy doesn't cover theft in the last year. There's not much risk of personal injury if you torch your car and claim it was stolen. This becomes an increasingly attractive option as the car ages.

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