Auto Insurance Claims: Understanding Where Your Money Goes

Car insurance payouts can be complicated, especially if you and the insurer disagree on the amount. If you've been in a car accident, you may be wondering where your auto insurance money goes. The answer depends on several factors, including who was at fault, the type of insurance you have, and the extent of the damage.

If the other driver was at fault, their insurance company should cover the cost of your car repairs, medical bills, and a rental car. If the other driver doesn't have insurance or flees the scene, your own insurance policy's collision coverage will typically pay for the repairs. Your policy may also include medical payments and personal injury protection to cover medical bills. If you have uninsured/underinsured coverage, it will also pay for your car repairs, a rental car, and pain and suffering.

In some cases, you may need to file a claim with your own insurance company, especially if there is a dispute over who was at fault. Your insurance company will then try to recover the money, including your deductible, from the other driver's insurance company.

It's important to understand your insurance policy and know what is covered before you get into an accident. Review your policy thoroughly to know what is covered and what is excluded. Additionally, consider adding accident forgiveness to your policy, which can help prevent your insurance rates from increasing after your first accident.

What to do at the scene of an accident

Being in a car accident can be a stressful and scary experience. Here are some steps you can take to help you navigate the situation and ensure you have the information you need for any necessary insurance claims:

At the Accident Scene:

• Safety First: If possible, pull your vehicle to the side of the road, especially if the accident was triggered by road rage or if you suspect you might be the intended victim of a carjacking. If someone is injured or the other driver fled the scene, call the police immediately.
• Check for Injuries: Prioritize the well-being of everyone involved. Call for emergency medical services if anyone is injured.
• Assess Vehicle Damage: Once you've ensured everyone's safety, evaluate the extent of the damage to all vehicles involved. Take pictures of the vehicles, including their license plates and any visible damage.
• Stay at the Scene: Do not leave the accident site. If you've hit an unattended vehicle, try to locate the owner. If you can't find them, leave a note with your name, address, and contact information, along with details of the accident, such as the make and model of the car and the location.
• Gather Information: Collect the other driver's information, including their name, contact details, insurance details, driver's license, and vehicle registration. If they don't have an insurance card, ask for their insurance company name and policy number. Provide them with your information as well.
• Document the Accident: Take pictures of the accident scene, including street signs, road conditions, and angles. Write down the location, time, and weather conditions at the time of the accident. Get the names and contact information of any witnesses.
• Notify the Authorities: Alert the police or highway patrol, especially if the accident is serious or someone is injured. Get the names and badge numbers of the responding officers, and ask where you can obtain a copy of their accident report.
• File an Accident Report: Even if the police can't come to the scene, file an incident report with the nearest police department or on their website. This official report will be crucial if there are disputes over damages, injuries, or insurance claims.
• Contact Your Insurance Provider: Notify your insurance company about the accident as soon as possible. The longer you wait, the harder it may be to recall important details. Get the name and contact information of the adjuster assigned to your claim.

Remember to keep essential documents in your vehicle, such as registration, proof of auto insurance, and emergency contact information. It's also a good idea to have emergency equipment like flares, cones, or signage to warn other drivers and prevent further incidents. Stay calm, follow these steps, and focus on gathering the information you need to protect yourself and facilitate the insurance claims process.

How to handle different insurance offers

Handling different insurance offers can be tricky, especially if you are dealing with the aftermath of a car accident. Here are some steps to help you navigate the process and reach a fair settlement:

Research the Cost of Repairs:

After the accident, file a report with your insurer. They will send a claims adjuster to assess the damage and provide an initial offer. To determine if their offer is reasonable, get multiple repair estimates from trusted mechanics or body shops. Compare at least three estimates to gauge if the insurance offer covers the necessary repairs.

Negotiate in Good Faith:

If the insurer's initial offer falls short, don't hesitate to negotiate. Maintain a calm and professional demeanour throughout the process. Ask the adjuster to explain their offer, understand their rationale, and then prepare a counterproposal based on your repair estimates. Remember to provide supporting documentation for any additional costs you believe should be included.

Understand the "Betterment Argument":

Insurance adjusters may use the "betterment argument" when dealing with older vehicles. If your car is repaired with newer parts, the insurance company may argue that those repairs have increased the value of your car. As a result, they might reduce their payment or charge you for the excess value. To counter this, you'll need to prove that the repairs do not, in fact, increase your car's value. An expert opinion from a mechanic or witness can strengthen your case.

Handle a Total Loss Situation:

If your vehicle is extensively damaged and deemed a total loss, the insurance company will offer a settlement based on the car's actual cash value. If you disagree with their valuation, especially if they haven't accounted for modifications or improvements, gather evidence to show that your car is worth more. You can also consider hiring a lawyer if you feel the offer is unfair or if fault needs to be established.

Finalize the Settlement:

Once negotiations are complete, confirm the agreed-upon settlement in writing. This document will outline the amount of the settlement and how the funds should be allocated. Make sure you understand the terms of the settlement and your obligations in accepting the offer.

Remember, you have the right to question and negotiate insurance offers. Stay informed, be assertive yet reasonable, and don't be afraid to seek alternative quotes from other insurance companies if needed.

How to handle an uninsured or underinsured driver

If you've been in a car accident with an uninsured or underinsured driver, you should take the following steps:

• Call 911, even if no one appears injured. Describe your location and any potential dangers, such as leaking fuel.
• Get the at-fault driver's name, address, phone number, and insurance information. Take a picture of their insurance card and driver's license. If they don't have insurance, don't be tempted to "work something out" outside of the insurance system.
• Seek medical treatment. Tell paramedics about every symptom, no matter how mild. Refusing or delaying treatment can seriously undermine your injury claim.
• Take photographs and videos of the cars, license plates, the accident scene, debris on the road, skid marks, street signs, and other indicators of location.
• Gather written statements from witnesses, especially if the uninsured driver fled the scene.
• Request a copy of the police report for your insurance company.
• Notify your insurance company about the accident. Failure to do so could result in your claim being denied.
• If you've suffered serious injuries, consider contacting a car accident lawyer to discuss your options.

If the other driver is at fault, you can report the accident to their insurance company, and their insurance should pay for your car repair, medical bills, and a rental car. If the other insurance company won't pay the full amount or refuses to pay, file a claim with your company, and they will try to recover the money from the other driver's insurance.

Uninsured motorist coverage will cover your injuries and other accident-related losses when the at-fault driver has no insurance. Underinsured motorist coverage will kick in when the at-fault driver doesn't have enough coverage to pay for your losses. These types of coverage are mandatory in some states and can be added to your policy in others.

How to handle a total loss

If your car is damaged in an accident, your insurance company will declare it a "total loss" if the cost to repair it is greater than its "actual cash value" (ACV). ACV refers to the car's market value at the time of the accident, not what you paid for it.

File an insurance claim as soon as possible:

Contact your insurance company and any other drivers' insurance companies involved in the accident. Total loss claims can take a long time to process, so it's important to initiate the claim promptly.

Tow your car to an approved auto shop:

While you can tow your car to any auto shop, taking it to a shop approved by the insurance adjuster handling your claim can make the process smoother. The shop will provide an estimate for repairs, which the adjuster will use to decide whether to total the car.

Gather the necessary paperwork:

You will need to provide the insurance company with your car's title. If you don't have it, you can request a copy from the Department of Motor Vehicles in your state. If your car is financed, review your loan details, as the insurer will pay the lender first, and you will receive any remaining money.

Research your car's ACV:

Before agreeing to an insurance payout, research your car's ACV by looking at similar cars (same model, year, make, condition, and options) in your area using tools like Kelley Blue Book. This will help you understand the current market value of your car and whether the insurance company's offer is fair.

Negotiate with the insurance company:

If you disagree with the insurance company's valuation of your car, you have the right to negotiate. Ask how they determined the value, and ensure that all the information used, such as options, mileage, and condition, is correct. You can also get quotes from used car dealers and view prices online for similar vehicles. Remember that the asking price is typically higher than the selling price. If you have custom parts, upgrades, or recent maintenance, provide receipts for consideration, as these may add value to your car.

Consider your options for keeping or replacing your car:

In some cases, you may have the option to keep your totalled car, which is called "owner retained salvage." In this case, the insurance company will deduct the amount they would receive for selling the car as salvage from your claim payment. However, keep in mind that a car with a salvage title may be harder to sell and insure in the future. If you decide to replace your car, the payout from the insurance company can be used as a down payment.

Seek legal assistance if needed:

If you are having difficulty resolving the claim with the insurance company, you may need to involve a lawyer. A car accident lawyer can help you understand your rights, negotiate with insurers, and represent you in court if necessary.

How to lower your insurance rates after an accident

Auto insurance rates often increase after an accident, especially if you are at fault. However, there are several strategies you can use to lower your insurance rates. Here are some detailed and direct tips to help you reduce your insurance costs:

• Shop around for insurance: Compare rates from multiple insurance companies to find the best deal. Prices can vary significantly between insurers, so getting quotes from several providers can help you find a lower rate. Remember to focus on the coverage you need and ensure that the quotes reflect that.
• Increase your deductible: Raising your deductible can lower your insurance costs. The deductible is the amount you pay out of pocket before your insurance coverage kicks in. By increasing your deductible, you can reduce your annual premium. Just make sure you have enough savings to cover the higher deductible if needed.
• Reduce coverage on older cars: If you have an older car, consider dropping comprehensive and collision coverage. These coverages may not be cost-effective if your car is worth less than ten times the premium. Review your coverage regularly to ensure it aligns with your needs.
• Bundle your insurance policies: Combining your home and auto insurance policies with the same carrier can often lead to a discount. You may also get a reduction if you insure multiple vehicles with the same company or if you have been a long-time customer.
• Maintain a good driving record: Safe driving habits can help keep your insurance rates low. Avoid speeding, accidents, and other driving incidents to prove you're a less risky driver. Additionally, a claims-free or violation-free history can sometimes lead to additional discounts.
• Take a defensive driving course: Some insurance companies offer discounts for drivers who complete a defensive driving course. This can improve your driving skills, reduce the likelihood of future accidents, and potentially lower your insurance rates.
• Improve your credit score: In some states, insurance companies use credit information to price auto insurance policies. A higher credit score can lead to lower insurance rates, as it indicates responsible decision-making. Pay your bills on time, maintain low credit balances, and regularly check your credit report for accuracy.
• Seek out discounts: Ask your insurance provider about available discounts. Common discounts include those for good students, drivers who complete a driver's education course, and drivers who are away at college without a car. You may also qualify for a low-mileage discount if you drive fewer miles than average or carpool to work.
• Review your policy regularly: As your vehicle ages, the cost of replacing it decreases, so you may be able to lower your coverage limits for vehicle repair. Additionally, if you've paid off any loans on your vehicle, you may no longer need gap insurance. Review your policy periodically to ensure it reflects your current needs and qualifications for discounts.
• Choose your vehicle carefully: The vehicle you drive can significantly impact your insurance rate. When purchasing a new car, consider the cost of insuring it. While cheaper vehicles are not always cheaper to insure, adding expensive features and upgrades can increase your insurance rate.
• Consider usage-based insurance: Usage-based insurance (UBI) ties your insurance rate to your driving habits. If you drive infrequently and practice safe driving habits, UBI can reward you with a lower rate. However, riskier driving habits may result in a higher rate.

Remember that the key to saving money on insurance is not just finding discounts but also getting the lowest final price. By combining these strategies, you can work towards lowering your insurance rates after an accident.

Frequently asked questions