Betterment, as an auto insurance term, applies when an insurance company replaces a part of your vehicle with one that is newer, or better, than the one being replaced. Because your insurer's obligation is to restore your vehicle to its pre-accident condition, and your car was probably not brand new when it got damaged, the insurer is not obligated to replace damaged parts with new ones. Sometimes, however, new parts are the only options available, and you may have to pay part of the cost for the new parts yourself.
Common Betterment Items
Insurers usually charge betterment on parts with measurable wear. Some parts of your car have stated life expectancies, either in miles or years. If these parts must be replaced during their life expectancies, the insurer can measure how much of their original life was remaining when the damage occurred. Tires and batteries are two of the most common betterment items. Suspension parts can also be considered for betterment.
The specific ways that an insurer uses to measure betterment during your claim vary according to the part in question. Standard automobile tires begin with around 11/16 inch tread depth, and are considered "bald," or in need of replacement, at around 1/8 inch. Insurers measure the remaining tire tread on a damaged tire to determine its remaining life. Batteries have life expectancies between three and 10 years, depending on the brand, and are often marked with the installation date. Insurers measure the amount of time that has elapsed since the installation to determine its remaining life.
Every state has different laws regarding betterment. Insurers are not permitted to deduct betterment in some areas. CarInsurance.com reports that betterment is only permitted in Wisconsin when the parts used increase the resale value of the damaged vehicle, such as with engine or transmission replacements. California accepts a broader range of items for betterment, including paint jobs, but it requires insurers to deduct an amount that "accurately reflect(s) the value of such deductions," meaning the insurer must document the betterment to demonstrate how the value was determined.