If you cause a collision that ends up causing extreme damage to your car, your insurance company might compensate you for these damages, as long as you have collision coverage. If the damages are so severe that it is not worth fixing the car, the insurance company may state that the car is totaled. Understanding what this means and how insurance companies come to this conclusion is important to know, especially if you are ever in this situation. Here are several things to know about totaled cars after accidents:
Insurance companies use different measures
For an insurance company to determine if a car is totaled, they will often use one of several common measures. One measure they may use is a comparison between the value of your car right before the accident to the cost for the repairs. If it will cost more to fix your car than the current value of your car, they may state that they are totaling the car.
The other common measure is a percentage. Some insurance companies will consider a car totaled if the repairs are equal to a certain percentage of the car's value, and this percentage is often around 75%. In other words, if the repairs will cost an amount that is equal to 75% of your car's value just before the accident, they may consider it totaled.
How you are reimbursed
When you have collision coverage and cause an accident, you are protected from the costs of repairs and damages. Collision coverage pays for damages, even if you cause them, but there is one important thing to know: when your insurance company pays you for the damages, they will pay only for the damages. If the car is totaled, they will cut a check for the value of the car just before the accident. Unfortunately, you might owe more than this amount for your car. If so, you will end up owing money on the loan you have on your car, even after the insurance company pays their part.
Gap coverage covers this
If you are in this situation and have gap coverage with your auto insurance policy, your gap coverage will cover the difference in the two amounts. This means that you will not owe money on your loan if the insurance company pays less than you owe, simply because your gap coverage will pay the difference.
If you have any questions about car collisions or insurance coverage, you should contact an auto insurance agency today.
Share9 October 2019
I still remember the first time I had to chose an insurance policy; I was 17 years old and had just saved up enough money to afford my very first car. I was so excited to begin driving, but overwhelmed with all of the different auto insurance options. My father helped me chose a full-coverage policy that would cover the cost of my car if it were to become damaged in an accident. When I inevitably caused a small fender-bender as a new driver, my insurance company paid for my car repairs, so it sure was the best policy for me! Now that I am older and have learned a lot about home insurance and other types of insurance, I thought I would make a blog to help others who need insurance advice, like what my dad gave me. I hope I can help you make wise insurance decisions!