What To Do When Your Insurance Won’t Pay

Should an accident total your car, you can be left with a lot on your plate. Not only have you lost your means of transportation and may be suffering from an injury, you also have to work with an insurance company to sort out the damage.

Recouping the cost of a totaled car can be a challenge, even if the accident wasn’t your fault. If an insurance company says your car is a total loss, they’re only required pay you fair market value for the car. A car is categorized as a total loss if the cost of repairing the car exceeds a certain threshold of its worth. Usually, if the cost of repair is more than 80% of the car’s value, the car is “totaled”.

In some cases, getting fair market value for a totaled car leaves you coming up short. Your insurance company might say your vehicle is only worth $10,000, even though you still owe your lender $12,000 for it. The insurance company may give you $10,000, but you still have to pay $2,000 for a car you’re no longer able to drive or even repair yourself. And to that last point, note that if you accept an insurance company’s payout for a totaled car (that $10,000), they have the right to take the car itself and sell for salvage. Usually, they do.

If all of this leaves you feeling low and lost, know that there are a few ways you can try to make the best out of a bad situation.

Understand the laws in your state. Every state has different laws about who is obligated to cover the cost of an accident. There are some states that require that a driver be “0%” at fault in order for the other party to provide a full payout. In other states, “fault” is assigned based on the extent to which each party contributed to the accident, and insurance companies pay respective to that percentage. Understanding the laws in your state can help level set who will be on the hook for owed money from the outset.

If you think the insurance company valued your car incorrectly, find ways to prove it. Your vehicle might be worth more than the insurance company says it is. You can seek out a qualified appraiser to evaluate your car, or you may wish to file a lawsuit (although, this should be a last resort). Perhaps the easiest course of action is to start with your own research and show how similar vehicle models are going for more money on the market. You can also double check that the cars your insurance company used to estimate the value of your car are truly comparable. Did the vehicles used for comparison have the same number of miles as your car? Did your car have other accessories that would increase its value?

Check to see if you have gap insurance. Does your auto policy include gap insurance? This can help cover the difference between the payout you received from your insurance company and what you still owe your lender. Gap insurance is something to check for when purchasing a new policy, too. Note: if you are less than halfway through the term of your loan, gap insurance is probably a good idea.

Look for other ways to get money back. If your insurance company gives you a loaner rental car after the accident, know that you’re not obligated to take it. Instead, you may be able to opt out and get money for it, which you can put toward your expense. This won’t be true for every insurance company, but if a rental car is on the offering table and you’re able to go without it, ask about your company’s policy.

Find more information about all things auto insurance by exploring the Schechner Lifson Corporation blog!