When my neighbour's son was driving his father's car, he lost control and went into a ditch, hitting a telephone pole. Luckily, he was not seriously injured, but the car was a write-off. My neighbour tells me that he got full value for his car from his insurance company. He wasn't charged any depreciation, and yet the car was two years old! When I "totalled" my car last year, I only got what the insurance company said was "Actual Cash Value" -- the value of the car less depreciation. Why didn't I get the same deal as my neighbour? -- Crash Test Dummy

Dear Crash:

That must have seemed like a real show of depreciation! But rest assured, your neighbour didn't get any special favours from his insurer. He got full value for his car because he had purchased a particular endorsement, or addition, on his automobile policy that limits depreciation charges. (Depending on the province in which you live, there are different names for this endorsement -- ask your insurance provider.)

The limited waiver of depreciation endorsement says the insurance company will not charge depreciation within the period of time specified (usually 30 months). That means that, for 30 months from the date you buy and insure your car, the company will not deduct for depreciation when calculating the value of your car following an accident. This could mean a saving of thousands of dollars if your car is a few years old, as in your neighbour's case.

You can request this endorsement when you are insuring a new car that you have just acquired from a dealer; it's simply a matter of asking your insurance provider to add it on to your policy.

Under the terms of the endorsement, the insurance company will pay the lowest of the following amounts (less the deductible on your auto policy):

• the actual purchase price of the automobile and its equipment;
• the manufacturer's suggested list price on the automobile and its equipment on the original date of purchase; or
• the cost of replacing the automobile with a new automobile of the same make and model, similarly equipped.
• The payment also covers all applicable taxes, but not tires and batteries.

At about $25 a year, the limited waiver of depreciation is a bargain! Unfortunately, many consumers are not aware of this option, and find out only after an accident -- and much to their dismay -- that their car is worth less than they expected.

A car accident is a jarring experience, but this endorsement can at least soften the blow to your wallet.

Note: The preceding information is based on the Insurance Bureau of Canada's guideline wordings. Remember, policies vary, so when in doubt, consult your insurance representative.