Places To Get Car Insurance Near Me – When your car is totaled in an accident, the insurance company will pay you the total value of the car – or more accurately, they will pay what they claim it is worth.
Almost everyone who has gone through this process can attest that the most frustrating part is receiving the car insurance company’s assessment of your car’s value. Almost always, the estimate is lower than expected and the amount you get is not enough to buy a new apple. Sometimes, that amount is not even enough to cover the amount owed on the car.
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Most customers are unfamiliar with the methods insurance companies use to price cars, making things complicated. Car insurers’ pricing methods are esoteric, based on abstract data, the details of which they are careful not to disclose. That makes it difficult for consumers to challenge a low offer from an auto insurance company.
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Knowing the basics of how insurance companies price cars and the terminology they use can put you in a stronger negotiating position.
When you report a car accident to your insurance company, the company will send an adjuster to assess the damages. The assessor’s first job is to decide whether or not to total the vehicle.
An insurance company may consider the vehicle a total loss even if it is repairable. Generally, the company determines the total cost to repair a car if the repair costs exceed a certain percentage of its value, from 51% to 80%, according to Insure.com. Some states require or provide guidelines for this percentage: For example, Alabama sets it at 75%.
Assuming the vehicle has been totaled, the assessor will carry out an appraisal and assign a value to the vehicle. Accidental damage is not considered in the assessment. The adjuster tries to estimate a reasonable cash offer for the vehicle immediately before the accident.
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Next, the insurance company hires a third-party appraiser to provide an estimate of the vehicle. This is done to reduce any appearance of impropriety or fraud and force the medium to adopt a different pricing method. The Company considers its own and third party reviews when making an offer to you.
You can hire your own appraiser if you disagree with the insurance company’s valuation, although you may need the insurance company’s approval to do so.
There is a big difference between the insurable value of your vehicle as determined by your insurance company and the amount needed to purchase a suitable replacement vehicle. The insurance company makes an offer based on actual cash value (ACV). This is the amount the company decides someone would reasonably pay for the vehicle, assuming no accident occurs.
Actual cash value usually takes into account factors such as depreciation, wear and tear, mechanical issues, cosmetic defects, and supply and demand in your local area. For example, State Farm specifically refers to an auto insurance value calculator: “We base your vehicle value on year of manufacture, make, model, mileage, overall status condition and key options – less applicable state taxes and deductibles and fees and taxes.”
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Before buying gap insurance, take the time to compare premiums and costs from the best car insurance companies to make sure you’re getting a fair deal.
Even if you buy a new car and only drive it for a year before the accident, its ACV will be significantly less than what you paid for it. Driving a new car off the lot will cause it to lose 9% to 11% in value, with depreciation increasing to 20% by the end of the first year.
In fact, the insurance company will ask you about everything from the miles on the odometer to the soda stains on the upholstery accumulated that year.
The amount ACV offers will certainly be lower than the replacement cost – the amount you would have to pay to buy a new car similar to the damaged one. Unless you are willing to pay the extra insurance with your own money, your next car will be a step below the old one.
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This type of policy uses the same method to calculate the total value of a car, but then pays you the current market price for a new car in the same class as your damaged car.
If you total your car soon after buying it, you could end up with negative equity in the car, depending on your financing agreement. Meaning, the insurance payment can be less than the amount you owe on the car.
The situation can get worse if the car is relatively new. The amount that the insurance company offers for the whole vehicle may not be enough to cover what is owed on the wrecked vehicle.
This can happen if you damage a new car shortly after buying it. A new car will gain its greatest value when its new owner drives it away. If an accident occurs in a year or so, the total car payment is likely to be less than the amount owed by the owner.
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If the borrower is able to obtain a court judgment, they can pursue remedies to collect the outstanding balance, including wage garnishment or bank account garnishment.
This is more likely to happen if the buyer has taken advantage of special financing offers that reduce or eliminate the down payment. While these programs certainly prevent you from having to pay a large amount of cash to buy a car, they almost guarantee that you will get a great sale with negative equity.
When your insurance check can’t pay your auto loan in full, the remaining amount is called a deficiency balance. Because this is considered an unsecured debt – the collateral securing the debt has now been destroyed – lenders can be aggressive in collecting on it. This may include seeking a civil judgment against you to force you to pay what is owed.
Like the replacement cost problem, this problem has a solution. You can add gap insurance to your policy to ensure you never face the remaining balance on a totaled car.
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This insurance pays the cash value of your car as determined by the insurance company and pays any remaining deficiency balance after you apply the proceeds to your loan.
Car insurance companies use many factors when valuing a car. These factors can include the make and model of the car, previous accidents, normal wear and tear from use, any new parts, the car’s mileage, and the car’s overall market value.
When paying for the loss of a vehicle, insurance companies will often use the actual cash value, also known as the market value, which takes into account the replacement cost of the vehicle less depreciation. This is the amount you would receive for the car if you sold it on the market today. Replacement cost, on the other hand, is the value of replacing your vehicle with a vehicle of a similar make and model. It does not take into account specific factors, such as wear and tear. The replacement cost benefits the vehicle owner while the actual cash value benefits the insurance company.
Yes, you can ask for more money when your car is totally damaged when negotiating with the insurance company. You will need to do your research first and come up with a supported reason why you should get more money. You should research the actual cash value of your car, know your state’s total loss threshold, and any other information that may help your case.
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Insurance companies can often be difficult to deal with, especially when a lot of money is at stake. Assessing the value of a car is even more demanding than in other areas of insurance because pricing is entirely up to the insurer and their methods are rarely disclosed. Doing some research and becoming familiar with the process can help you have a stronger negotiating position when dealing with your auto insurance company.
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