Total Insurance Clarity

By Chelle Cordero

April 3, 2015 5 min read

He was driving his son home from college at the beginning of the summer break when they were sideswiped on the parkway. It caused a rear tire blowout and a rollover. Luckily, both occupants were strapped in, so personal injuries were minimal; the car didn't fare so well. When the insurance company offered a settlement, it was far below the anticipated replacement value, and the customer wouldn't accept it. The customer won. The vehicle's owner didn't have any special pull; he just did his homework.

Cars are among the biggest purchases most people make, and a car accident can be painful. A vehicle may be considered a total loss because repair would be more expensive than the market value of the car before the accident. Insurance-company adjusters use specialized formulas to determine market value. Settlements often equal the fair market value minus the deductible and costs related to the disposal of the wreck. Other factors vary from state to state; they may add estimated sales tax, registration and title costs of a new car.

Immediately after a crash, ensure your safety and the safety of your passengers. Be aware of surrounding traffic. Do not leave the scene of the accident. Call 911, and stay calm. Tell the operator the location, the number of vehicles and whether there are any suspected injuries. Seek medical attention for any injuries you may have suffered. Don't confront other drivers. You can exchange insurance information, but be sure to have that information available for responding police, as well. If you can, take pictures of the scene and vehicles. Report the accident to your insurance company as soon as possible.

Before you accept any settlement, do your own research and find out the pre-accident market value of your vehicle. Look online and in local ads for prices of comparable vehicles offered for sale. Start your search close to home, within 25 miles, and expand the radius if you can't find two to three vehicles to compare. Don't forget to check online references such as Kelley Blue Book's website ( to get the current market value of your car. Once you have this knowledge, you can attempt negotiations with your insurance company for a more palatable settlement, if necessary. Once you accept a settlement, the wrecked vehicle becomes the property of the insurance company and may be sold at salvage.

Sometimes the market value of your vehicle is less than what you may owe on an outstanding auto loan. Unfortunately, the difference is not the insurance company's problem, and you are still responsible to the bank or lien holder for the full amount. Because cars do depreciate sometimes faster than the loan payoff accounts for, it's a good idea to periodically check market value before any mishaps occur.

If you find you owe more than your car is worth, speak to your insurance agent about gap insurance, which covers the difference between what you owe and a potential settlement on a totaled vehicle. Depending on your state's regulations, settlement and gap insurance checks may be payable directly to the lien holder or jointly to you and the lien holder. Also depending on your state's regulations, you can elect to keep the totaled vehicle and accept a payout of market value minus deductible and potential salvage revenue -- just be aware that a totaled car cannot be insured.

Car insurance is mandatory in all U.S. states and Canada. However, some states permit minimum coverages, which, while legal, are often not sufficient to cover most needs in the event of an accident, injury or total write-off of a vehicle. It's a good idea to meet with your insurance agent regularly, perhaps just before each premium period, to go over your policy and understand what it offers, what your state requires and what your personal needs are. Ask about vehicle replacement, car rental after an accident, personal injury liability and gap insurance. Know exactly what you are and are not covered for, and learn your state's rules and regulations regarding fault/no-fault, uninsured motorists, collision and comprehensive coverage and more. The more you know the more proactive you can be if the need arises.

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