I got to thinking about my Optiom Car Insurance recently because I backed into a telephone pole and dented my car’s rear panel. Here is my Optiom Insurance review.
I had just changed the comprehensive insurance policy to BCAA to save money. I took it to an autobody shop for an estimate just to see how much it would cost if I were to repair it myself and not go through the insurance company. The estimate was a whopping $1300+ and the auto body shop actually recommended that I go through with a claim for the insurance company.
I was all bummed up about the cost of the repair and then I remember that I had bought Optiom insurance! So the deductible of $300 would be covered!
Here’s my experience with Optiom insurance so far including what got me to purchase it in the first place. It’s an optional insurance not like home insurance where you definitely should buy it. Home insurance in Vancouver is almost a must given our risk for an earthquake in the Pacific Northwest.
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Got Suckered In for the Optiom Inc Upsell
When I first bought my car, I got suckered in for the insurance up sell. I remember paying about $1600 for the additional insurance with Optiom, knowing that it would last 7 years.
The Optiom Insurance car replacement insurance is called the “Gap Pus Plan” and it covers additional insurance that comprehensive insurance does not cover.
It also covers the difference between what ICBC (or the primary insurer) will pay for the depreciated value of the car and the MSRP of a brand new replacement vehicle.
Unfortunately, I felt pressure to buy this premium “then and there” because the price of the premium was locked in and there wasn’t time to look or shop around- I think this is how they get you!
What’s replacement car insurance?
Replacement car insurance bridges the gap between what your primary insurer will pay you (based on depreciated value) and what you need for a replacement amount in ‘todays’ dollars.
So let’s say it’s year 5 and the purchase price of your vehicle was $19,000 and the current trade in value is $9000 according to Canadian black book (which is the Canadian version of the Kelley Blue Book, a car valuation site).
Let’s say there was a bad accident and the car was considered a write off (meaning damages exceed the current valuation of the car and repairing it would cost more than replacement of the car).
The insurance company (namely ICBC here, a crown corporation in BC that continues to raise their car insurance rates with no end in site) will only give you about $8000 to replace your car. Or less than trade in value anyway (which could mean much less than $8000 instead of the number idealistic rounded up to $8000).
Whoopee, you get $8000 to buy a new car. If you had purchased the Total Loss Benefit with Optiom insurance, they would pay you $11,000 –on top of the $8000 you would get form ICBC–to buy a new car (or whatever the MSRP price of the replacement car is if there was a newer version of the car and if the car was indeed $19,000 MSRP).
Here’s what the Optiom Gap Plus Plan covers for new vehicles:
It also looks like this is not just for new cars, but also for used cars. However, instead of coverage for up to 84 months (7 years), coverage is for up to 60 months, or 5 years for used cars.
Optiom Plan Coverage
For new vehicles there is a Total Loss Benefit where Optiom will pay the difference between what ICBC pays you and the MSRP of a brand new replacement vehicle. In addition, there is a New Body Parts Replacement Benefit where Optiom will pay for OEM replacement parts up to $10,000 per year (this is on top of the amount you will receive from your primary insurer).
For used vehicles, Optiom will also pay the difference between the depreciated amount and original purchase price plus an addition 5% per year.
The Deductible Reimbursement Benefit was the most useful for me over the 7 years. Optiom will reimburse for the $300 deductible if your car is repairable or $500 if your car is written off.
Is Car Replacement INsurance Worth it?
Well, strictly from a mathematical standpoint, it’s probably not worth it because the chance of having a total loss and writing off your vehicle is low– I mean, that’s why this insurance exists in the market in the first place, Optiom wouldn’t be profitable and in business if they weren’t doing well. However, I have a disclaimer, I’m no actuary though and don’t have real stats to prove this.
They have additional custom insurance options (can’t remember if I bought these additional insurance options though). One cool thing is that there’s even insurance for FOB replacement if you lose your car key FOB, which is reimbursable by Optiom up to $500.
However, even though it’s probably not worth from a mathematical standpoint, from an emotional standpoint I think it’s worth it, because it gives you peace of mind and also reduces stress at the time of claim. I guess it depends on how much risk you want to take.
Just like the Psychology of Money book says, much of the time our emotions trump math.
If you want protection from the inflation costs of a replacement vehicle, Optiom may be for you.
Option Can Gives Peace of Mind
A few years ago, my car got broken into. It was a hassle to get the window replaced and there was a $300 glass repair deductible I was asked to pay (the total bill was something like $650 from my primary insurer). I was complaining to a coworker about my broken car window.
She talked about how she recently bought a new car, and therefore bought replacement insurance and that it covered things like glass repair and at fault deductibles. I mean, $300 is not bad at all, nor is it a big deal. But it just sucks having to fork it over for something that you didn’t wish upon yourself.
I was like hey.. that insurance sounds familiar…
Because…I BOUGHT THAT INSURANCE when I first purchased my car!!
This is how reading the fine print and remembering it will save you money.
So I promptly called Optiom up and Optiom confirmed they would pay for my deductible. I got $300 back from Optiom after filling out a bit of paperwork via email (it was straightforward), it was great and drastically reduced the stress at the time of having to fork out $300. I got a cheque in the mail shortly after submitting the paper work.
Just like home insurance, having insurance helps you sleep at night.
Optiom even has Key Fob Reimbursement Benefit. Unfortunately my cheap car keys cracked and it cost about $300 to fix. However, if you lose your car’s key fob, Optiom will reimburse you the cost to replace it, up to a total of $500.
Reporting Your CLaim With Optiom
Reporting my claims with Optiom was easy.
I called their number 1-800-613-3705 and I also emailed them at firstname.lastname@example.org.
You have to report and submit your claim within 90 days of the date of loss.
Deductibles Optiom Paid For
So far, of the $1600 that I paid for initially for the insurance, I will have received in total $900 back in the form of glass repair and deductible payments.
Glass repair a few years ago and another $300 which was my fault when I somewhat backed into a telephone pole and hit my side panel.
Just a few months before my Optiom expired, I also noticed hit and run damage to my car and had my bumper fixed (it was just an unsightly scrape) which is another $300 that Optiom covered.
So over the past 7 years, Optiom has only cost about $700 because I have received $900 in deductible reimbursements.
Whatever the case, hopefully you can decide for yourself whether a car replacement was worth it after reviewing the calculations for your particular situation.
You may also be interested in:
Do you have additional car replacement insurance? Or is it for suckers like me?
Did you sign up for Optiom Insurance, what do you think of it?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.