Insurance agreement – OC or AC?
The purpose of the insurance agreement is to receive protection from risk of an occurrence of a random event (e.g. traffic accident, hailstorm, collision with a tree or animal). On the one hand, compulsory OC insurance protects the perpetrator of a damage from the obligation to pay the compensation with their own money. On the other hand, it ensures the repair of the loss for the injured party. AC insurance protects the insured from losses which might result from a damage on their vehicle due to a random event (caused either by another person, such as e.g. road collision, independently of other people, such as e.g. hailstorm, or caused by the insured themselves, e.g. unintentional accident).
In the event of a damage on your car due to a road collision which was caused by a driver of another vehicle, you are able to choose on what grounds you will seek compensation. You are entitled to use your own AC insurance or to seek compensation by contacting the insurance company of the perpetrator due to their compulsory OC insurance.
Qualification of the loss: partial loss and total loss
The rules for establishing the scope of the loss and amount of compensation due under OC insurance and AC insurance differ. Taking into consideration the scope and the nature of the damage on the vehicle, we differentiate between partial loss and total loss.
In the event of settlement for loss under compulsory OC insurance of the perpetrator of the accident:
- partial loss – occurs when the cost of the repair of the damage on the vehicle is not higher than its worth from before the collision (in other words – repairing the car pays off)
- total loss – occurs when the cost of the repair of the damage on the vehicle is higher that its wort from before the collision (so in other words – the repair of the vehicle is financially unprofitable).
By settling the loss from the compulsory OC insurance of the perpetrator, for the costs of repair to be included in the compensation, they have to be necessary and financially justified. Their purpose should be to restoration of the vehicle to the state from before the collision.
They shall also include the prices of the parts, materials and services of the local market of repair facilities specific to the injured party.
In the event of settlement of the loss from the AC insurance the rules for qualifying the loss are indicated in the insurance agreement or in the general insurance conditions (so called GIP). Insurance companies usually use conditions as follows (however there are exceptions to these rules):
- partial loss – occurs when the cost of repair of the damage on the vehicle is no higher than 70% of its value from before the collision;
- total loss – occurs when the cost of the repair of the damage on the vehicle is higher than 70% of its value from before the damage has been inflicted.
When settling the loss under AC insurance, the insurance agreement might provide for specific rules for estimating the value of the vehicle or the costs of repair for the purposes of qualifying the loss. By settling the loss under AC insurance. The value of the vehicle estimated under the AC insurance might differ from the one estimated under compulsory OC insurance of the perpetrator of the incident. However the compensation for the repair of the car might be lower than the actual cost of repair in the authorised repair facility using original parts.
Settling the loss – OC or AC?
The injured party who had an AC insurance for their car, in the event of a loss bore in the course of a collision liability for which lies on the driver of the other vehicle, can decide whether they will seek compensation from the insurance company of the perpetrator on the basis of their compulsory OC insurance or whether they will use their AC insurance.
Choice of one of the variants might affect the way of qualifying the loss (partial or total) and the amount of compensation received.
Such a choice particularly matters when the vehicle is used under the leasing agreement. Situation when the loss might be qualified as a total loss under the AC insurance might be beneficial for the user of the vehicle because it results in accounting and terminating the leasing agreement, as well as the sale of the damaged car. The user also might acquire a new vehicle. However choosing the settlement under the OC insurance in a situation when the cost is not higher than 100% of the value of the car before the collision allows the repair of the car and its further use.