Just in case you haven’t seen it, take a look at this video. In it, the owner of a Bugatti Veyron is seen deliberately driving his $1M car into a salt marsh, effectively totaling it. He did not realize he was being recorded at the time, and this video proved critical in his recent conviction for insurance fraud.
The interesting thing (to me) is that he reportedly had an insurance policy that would have paid him $2M in the event of an honest loss of the vehicle, despite the purchase price of the vehicle being only $1M.
I know that you can buy as much life insurance as you want, provided you’re willing to pay the premium - but why would an insurance company be willing to insure a physical thing for anything more than its actual value? It seems like a situation rife with incentive to commit exactly the sort of fraud that happened.
For one thing, purchase price is not always equal to replacement cost. I don’t know wth exact model in the video, but this Forbes article says
Perhaps he bought it for a million and added another million in aftermarket upgrades. Maybe he got a great deal. If it would cost $2.5 million to replace, a $2MM dollar policy wouldn’t be out of line, for insanely rich values of “out of line”.
Wreck a car insured with the likes of Progressive or State Farm, and they’ll pull out the Blue Book or similar valuation guide and pay you based on that.
You need to go with specialized companies such as Hagerty when you have an unusual, rare or antique vehicle - with them, you can negotiate a total loss value that reflects the vehicle’s rarity, the cost of restoration work, future loss of rental income, etc.
Insuring for more than purchase price is not restricted to cars either - a co-worker bought a motorcycle a few years ago, and its mere existence as a tangible object rather than a model to be ordered from the factory made it worth more than purchase price as there was a several month wait on factory orders. He received (and declined) several offers to buy it for well over purchase price.
The trouble with blue book value is that the Veyron was not made in enough numbers to work like that.
Some insurance policies pay “Agreed value” … just like life insurance, whatever you say it is worth. However they may outs such as “except for gross inflation of the market value”, or “replaced with vehicle very similar vehicle, if insurer wishes”.
Here’s one for sale and they want $3 M . Seems a few thousand in decorations makes its a “special edition” worth $2 M more.
I had an argument with an insurance salesman over this point once. Yes, you cannot insure your house twice and collect double when it burns down. (One or the other comes first, and the second policy will only cover your “loss” which is what the first policy did not pay of your loss)
However, this guy sold disability insurance, and also there was “accident and sickness” insurance on some people’s car and house payments through the bank. As a result, some guys who worked in the factory where I worked would get injured, be off work, and collect more that they would if they were working - 70% of salary PLUS mortgage and car payments.
These guys really hated the company’s light-duty work plan. I used to like the insurance sales guy until we discussed this and he became quite heated in arguing that there was nothing wrong with double-dipping disability insurance.
When the policy renews, they ask me if I want to change the agreed value (other than the automatic inflation adjustment). I can also call them at any time to adjust the value. They have the option of asking for documentation - if they don’t ask but agree to adjust the policy (and I pay the added premium) that’s what they’re responsible for in case of total loss / damage. I’ve bumped the value by $100,000 and they just went “Ok, your new premium is…” and didn’t ask for anything. On the other hand, if I wanted even $50,000 coverage on a rusted-out AMC Gremlin, they’d probably want to know why…
In the case of the car I’m talking about, the value is partly based on where it has been and what it has done, so there is no “comparable car of equal value”.
Policy holders on this type of policy generally have a long-term relationship with the insurance company, and I’m sure the company develops some sort of customer profile to decide what is reasonable and what isn’t.
This is a bit more of a gray area though, as disability =/= accident/sickness.
You could be eligible to claim for one but not the other.
And regarding getting more than your salary if you get injured, I have no issue with that. Maybe the out of pocket expenses of being temporarily disabled make this necessary (e.g. having to pay for taxis because you can’t drive, someone to help look after children etc), and if you paid the premiums, fine.
Speculation on cars like the Veyron is rampant, so valuations (aside from the new sale price) are necessarily speculative too. Sometimes (Ferrari F40) they go up hugely in price, and sometimes (Bugatti EB110) they go down.
[QUOTE=Whiskey Dickens]
What make and model of motorcycle was it? My two guesses are Ducati Desmosedici or one of the newest generation of Norton Commandos.
[/QUOTE]
Oddly enough, it was a Harley Fat Boy. IIRC, it was a particular color or trim level that made it scarce. He didn’t sell it, but he did make a bit of money leasing it for use in a couple TV commercials.