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There are many voluntary motor vehicle insurance alternatives available, with varying scopes of coverage.
Typically, the most limited voluntary motor vehicle insurance policies compensate at least for damages caused by elk, fire and theft. More extensive policies also pay compensation for various crashes, such as damages to the bodywork. Extensive voluntary motor vehicle insurance policies also include other types of cover, such as those for towing or replacement car.
The claimant has the obligation to show that an event has taken place, defined as compensable by the policy terms. For example, in case of damage caused by vandalism, this means that the claimant must be able to demonstrate that the vehicle has been subject to intentional vandalism.
The compensable events are defined in the policy terms. If the damage is covered by the terms, the first option is to try to repair the car. The voluntary motor vehicle insurances normally contain an excess (also called ‘deductible’), and any damages smaller than that sum are not compensated by the policy. The excess is a sum that the customer always has to pay.
If the damage caused to the car is so extensive that the repair is not rational in economic terms, the insurance company may salvage the car. This is the case when the estimated sum of the repair costs is higher than a percentage defined in the policy terms, for example, 70% of the value of the car. The more extensive voluntary motor vehicle insurances provide for supplementary covers for salvage situations, usable for additional compensation or other benefits on top of the salvage price proper.
If such supplementary cover for salvage situations is not included in the policy in question, the salvage value paid out is the car’s fair value. The term fair value generally refers to the cash price which more than one person had, in reality, been prepared to pay for the car prior to the accident. The fair value is normally defined on the basis of the vehicle’s individual details, and for example, the Internet sales service ads of corresponding vehicles are often indicative. The fair value does not refer to the asking or selling prices of car dealers because such prices include, for example, the dealer’s margin on the sale of the car. Neither does fair value refer to the refund for an old car in trade-in, the dealer’s purchase price or the car’s trade-in credit value.
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