This instrument is a technique employed by the GEICO insurance coverage firm to find out the worth of an insured merchandise, usually a automobile, on the time of a loss. The calculation begins with the merchandise’s alternative price when new after which subtracts depreciation. Depreciation accounts for components corresponding to age, put on and tear, and mileage (within the case of autos). For example, if a automobile initially price $20,000 and has depreciated by $5,000 as a result of its age and situation, its worth, as decided by this calculation, could be $15,000.
Understanding the method of building the merchandise’s present worth is necessary for policyholders. It’s because it straight impacts the quantity of compensation obtained within the occasion of a lined loss. A clear valuation technique can result in honest settlements and keep away from disputes. Traditionally, disagreements over automobile worth had been frequent, however standardized depreciation fashions and accessible calculation strategies have helped to attenuate discrepancies.
