Car accidents can be traumatizing, but the aftermath doesn’t have to be! The last thing you should be stressing about is the car - take care of yourself physically first, and above all. The first step in dealing with the vehicle-related fallout is to research the value of your vehicle before the accident. “Totaled” is just a buzzword insurance companies use to qualify an accident that has left your car in a condition in which the repairs will cost roughly 75 percent or more of the vehicle’s worth (this number varies by state, however, and may be as low as 50% or as high as 100%). This term is only applicable if you file an insurance claim.
Who was declared at fault in the accident is an important consideration. If you were at fault, your insurance policy should at minimum cover the other driver's vehicle and any associated medical bills, up to your coverage limits; you're responsible for any damages beyond those limits. If you want to avoid filing an insurance claim altogether, you and the other driver can agree that you'll pay them directly and bypass your insurance company. If you were at fault, but only have liability coverage, you would be responsible for any repair costs for your vehicle. (If you aren't sure what all the different types of insurance policies include, check out our blog post where we break it all down for you!)
Depending on the value of your vehicle and the damage sustained, it could be more cost effective to pay out of pocket for your vehicle's repairs, or simply choose to salvage the vehicle and purchase another. If you were not at fault in the accident, the responsible party's insurance will handle the claim, or once again, the other driver may ask that you provide an estimate for repairs and let them pay you directly, rather than file an insurance claim. Overall, you really have three options after an accident:
- File an insurance claim. If you have comprehensive coverage and/or gap insurance, filing a claim will probably be your best option, especially if you have an existing loan. You will file a claim with the insurance company (yours or the other driver's, depending on who was at fault), and they will appraise the value of your vehicle and send you a check. However, after you have received the appraisal amount but before you accept the payout, make sure you have done your research to be assured the amount they are offering is fair. If you find that there is a large difference in the vehicle's value based on your research versus what the insurance company has offered, find a third party appraiser. But make sure the value is a large enough difference to matter, because you will be responsible for paying the appraisal fee.
- Pay to fix it. If your car is older and not worth a lot of money, it may be more cost efficient to pay out-of-pocket (for example, you may choose to repair the mechanical damage to get your car in safe driving condition, but opt not to repair cosmetic damage). Weigh your options and crunch the numbers. You may find that it's most cost effective to fix it without filing a claim and either sell it or drive it until you can buy a new car.
- Salvage it. If you don’t have enough coverage to cover a totaled vehicle, you can sell it to a salvage yard or dealership under a salvage title. You should only consider this option if you think you will get more from selling it than filing an insurance claim.
One final consideration you shouldn't overlook is gap insurance. Say you bought your car brand new and spent $20,000. After the first year, your car may only be worth $15,000, but you may still owe $17,500. If you are involved in an accident, the insurance company will only pay you what your car is worth: $15,000--you will be responsible for paying the remaining $2,500 to your auto lender, unless you have gap insurance, that is. Gap insurance is very important, especially if you buy new, or the term of your loan is spread out over several years. If you're in this situation, you're leaving yourself vulnerable by being upside down in your loan (owing more than the vehicle is currently worth).