Over 20 years ago, early in my career, I learned a valuable lesson about the Limited Waiver of Depreciation, also known as SEF 43, and why it's crucial for new vehicle owners.
One of my clients, let's call him Joe, had just purchased a brand-new Mustang. During our conversation, I recommended the Limited Waiver of Depreciation for his new car. Joe declined, saying the dealership had already sold him coverage for the vehicle’s value. Less than a month into ownership, Joe’s Mustang was totaled when another driver ran a red light. Since the other driver was at fault, their insurance company only paid Joe the depreciated value of the Mustang. And back then, the minute you drove a vehicle off the lot, its value could drop by 10% or more.
Joe, understandably furious, called me. The protection the dealership sold him wasn’t what he thought—it was finance protection, which only covers the difference between what you owe on the vehicle and the payout from the insurance company, but only if the payout is less than the remaining loan balance. Since Joe had put $10,000 down, the insurance payout was actually more than what was owed on the loan. That meant the dealership coverage didn’t respond, and Joe was left without enough money to replace his vehicle. He was out of pocket more than $7,000 because of another driver’s mistake.
Had Joe opted for the Limited Waiver of Depreciation, his insurance would have topped up the payout, giving him the full MSRP and preventing a significant loss. Fortunately, I was able to negotiate with the insurance company to backdate the waiver addition, but it could have been a hard lesson learned.
From that point forward, SEF 43 became mandatory in my eyes, yet for many brokers, it's still seen as an "upsell." Whenever I hear them talk about removing it to save on the premium, I urge them to reconsider, and I share Joe’s story as a real-world example of why this coverage matters.
Don’t find yourself in Joe's position—always confirm you have the Limited Waiver of Depreciation when insuring a new vehicle. You’ll thank yourself if the unthinkable happens.
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