After a Car Accident, Who Pays for What?

What Does the Insurance Company Have to Pay for When My Car is Damaged in a Car Accident?

Once the other insurance company has accepted responsibility for the crash, they will assign an adjuster within days to assess the extent of the damage.

If the car can be repaired:
  1. You are entitled to compensation to rent a car to get around while your car is out of commission. Understand that they owe you a comparable vehicle but in reality, they will only pay around $28/day without a fight.
  2. Even if the estimate to repair your car comes in low, there are often supplementals, which are repairs the shop finds after breaking the car down.
  3. If the repairs are done badly, it is the repair shop’s fault. It is not the insurer’s fault unless they expressly told you they guarantee that shop’s work (if it’s an “approved” shop).
  4. Once the repairs are complete, be sure to ask the insurer for how they calculated the diminution in value and what formula they used.
  5. Diminution in value is a term reflecting the fact that a wrecked and repaired car is worth less than the same un-wrecked car. It commands a lower sales price when you try to sell it later.
  6. Most carriers will not pay diminution for cars older than 10 years or with more than 100,000 miles on them. It also does not apply to cars with prior crashes.
If the car is going to be totaled:
  1. If you want to buy it back from the company, theywill take out the payment they normally get for the “salvage value” of your car. That is what a salvage yard pays them for the junked car.
  2. It is up to the insurer to decide if it will be totaled but a little haggling can yield some number swings.
  3. Pull the NADA black book value online, as this is what insurers use. Notify them of any recent upgrades (tires, stereo, etc) when haggling over value.
  4. If you think they are “low-balling” you, do research by calling to find out whether cars listed online actually sold and what the sales price was. You will need at least three comparable sales to have an effective argument in small claims court.
  5. When you have agreed on a price, it is okay to sign the power of attorney to turn the car over to the company.
  6. If the car is worth less than you owe on it, you are stuck paying the gap between the value of the car and the loan, unless you have gap insurance. Sorry, but that is the law and you need to buy “gap coverage.”
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