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.
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 claims@optiom.com.
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.
Insurance companies are in the business of making money. So more and more I try to think of insurance for only those things that I couldn’t or wouldn’t want to pay to replace. I don’t insure for peace of mind that I wouldn’t have to shell out a few hundred bucks in the event of an accident. My theory is self insure whatever you can with your emergency funds. And pay for insurance on the rest. Don’t feel bad, insurance is good, but it is an industry that is mostly built on suckers and playing on peoples fear to get them to over-insure. And we all get suckered once in a while. I’m trying to limit mine to no more than once per day. 🙂 Tom
@Tom- I know, they are making money off me for sure lol, I don’t know what I was thinking when I bought that. I think it was my first new car purchase and the decision had to be made quickly (at point of purchase).
I don’t think you’re a sucker, GYM. Lol. We don’t have car replacement insurance and usually we don’t get extended warranties on anything neither because Omar tends to think they’re pointless. If I’m making a purchase and I’m by myself I will decline the extended warranty as well. And of course all of this is in the hopes that nothing happens later!
@Thinking of Someday- Hah, I know, extra insurance is for suckers! We went furniture shopping today and were presented with an insurance for STAINS on a microfibre couch. I’m going to look into it to see if it’s worth it. Haha they apparently can replace the couch if they can’t get the stain out (e.g. young child with crayons and sticky toddler hands insurance).
I think replacement cost is good to have, just not from Optium!!!
We don’t have additional car replacement insurance, just the standard car insurance but I see your POV on having it. That peace of mind in case something happens to your car is an assurance for you, $1400 for 7 years isn’t really that bad a price to pay.
Having the standard car insurance plan is fine for me in hopes that nothing really happens. We pay a lower premium for our insurance by choosing a higher deductibles across the board.
@Kris- To be honest if I didn’t have this extra insurance I don’t think I would have the dent fixed, haha. The cons outweigh the pros in terms of having the ding to my pristine insurance record haha.
I have a comment about Gap Optiom Inc…..Just try to get cancel and get your money back if you haven`t had an accident or put in a claim!!You will get all sorts of excuses.
@Anonymous- Cancelling never crossed my mind, since it is a one time thing! Did you get your premium back?
I am paying 30 dollars a month for 7 years.which is about 2,900.thinking of canceling
@Linda- I wonder what the penalty for that is. I have not thought about cancelling.
No cancellation fee on monthly. If you cancel now (years in) you wouldn’t get much back if you paid in full. You could however transfer to a new vehicle.
@Anon- Thanks for sharing- good to know you can transfer it to a new vehicle if needed.
You are only paying for 4 years of financed through Iptiom 🙂
I just wanted to point out that you also would have had your vehicle fixed with all brand new OEM parts. This costs much more than after market or salvaged parts. If you factor this in you may have broke even already. The difference Optiom pays for a Q5 Audi windshield over a after market one is $600 alone.
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So I bought a used car (2018) two weeks ago at a dealer and got suckered into buying the Optiom plan. I am on a monthly payment plan and thought I would be able to cancel with no penalty or maybe a small admin fee. Just read the fine print that was NOT explained to me and get this…the minimum retained, non-refundable premium is $680 of a total $1495 premium. Plus there’s a $100 cancellation fee! That means if I cancel, I lose almost $800. But that’s not all. What I didn’t see and was not told was that there was a $383 dealer referral fee added to my premium. Are you kidding me? I am furious. Will be calling tomorrow but am not hopeful. They catch you on a high after buying a car, but also when you’re exhausted from all the paperwork of the purchase. I should have known better, I suppose. ?
@Lia- Ugh, good luck getting your money back. They totally catch you- I didn’t hear about Optiom until I bought my car too. The commissions/ incentives is just terrible, buying a car is usually not a fun experience, I really dislike sales people. That’s a huge commission no wonder they are high pressure.
Exact same scenario as Lia above.
Just bought a used 2018 truck in July. Paying $65.35 a month for next 47 months = $3,071.45
But policy amount payable says $2,557, so now paying and extra $514.45 in interest charges?
And cancellation fees on my plan are $764 plus $100 = $864 total
It’s been only 3 months, but might as well wait 12 months before cancelling so as to get some potential $764 cancellation value back.
Plus in fine print. In event of total vehicle loss the potential difference awarded would be in a credit towards another same vehicle valid only at the same original dealer. Policy not valid for cash towards another vehicle at another dealer. Which forces you back to the one and only dealer.
Oh yes…also paid a $423 referral fee on my policy to sales agent. Easy money for 10 minutes of high pressure sales effort. And looking at my sales invoice I also paid an $399 fee for insurance consulting.
Ouch….did they ever get me.
@Wayne- Damn. We were all blindsided. My insurance will be running out next year but I think I’ve ‘recouped’ about 1/3 of the cost of my premium so far.
I have made more than my money back. I paid for Optiom up front and in full. I did not finance it. Just my vehicle. Between changed windshield, minor and major accidents, getting OEM parts and replacement of my vehicle that was totalled I wouldn’t and won’t go without the coverage for a new or newer used vehicle! I’m grateful and honoured to have had it when needed. For those years that just keep on giving [(2021 -sarcasm)] … and able to have this kind of coverage has been a God-send seriously, and I personally would recommend it to anyone!
Just my experience and opinion. Please don’t hate me for telling my experiences with Optiom. They were also very helpful and kind everytime. Best of all -The employees/client care reps, don’t act like it’s their money they have to give out! 🙂
@keepontrucking- Thanks for sharing your experience! So sorry to hear that your car was totalled! Yeah, I had good friendly customer service with Optiom as well when I had to file claims (which were numerous times).
As insurance agent who sells optiom, just want to clarify that the referral fee is paid to the dealership, not agent. We only get 2% of the portion of the policy , so it’s not much($30 on avg). The coverage is for your benefit to cover the total or partial loss if something happens.
Since I am in the industry, I see so many claims on a daily bases and can tell you for sure that 2021 was the year with the highest total losses ever in BC, due to summer fires, autumn floods and winter snow . Many people got paid out based on the black book value or actual cash value which doesn’t cover the market value ( that has gone up significantly due to low inventory and high demand) and unfortunately, they cannot replace their vehicles even with the same year they had previously.
@abcde- Thanks for sharing! Good point about summer fires, floods, and winter snow- the average person I think doesn’t think about catastrophic incidents like that causing total loss to the car (I know it doesn’t cross my mind so easily).
When I bought my beloved 2021 Elantra on June 2021 I also purchased the Optiom Plus Policy. Well just about 6 weeks ago, some idiot on his phone rear ended me and it became a write-off.
Yes, the chances of getting your vehicle written off is low, but I sure am glad I got this insurance. Now with my replacement vehicle, I do have more peace of mind knowing I have it covered with Optiom (yes, I bought it again for the new car).
That being said, pay attention on the road when you’re driving!
@kittyhack- Thanks for sharing your experience! Sorry to hear you got rear ended. I’m planning to get a dash cam soon now that my Optiom insurance has ended the 7 year term.