|
What happens when a traffic accident devastates your
car? It's not a scenario most drivers want to think about. Still, it's one you should consider before
it happens, especially if you're shopping around for an auto insurance company.
Most of us use the term "total" in casual
conversation, as in, "Man, did you hear Dinkins totalled his car driving back from the party last
Saturday?" When you total something, you wreck it completely. That's not too far from the insurance
industry's definition of a totalled car: When you total your car or when someone else does you cause
so much damage to the car that it would cost more to fix it than what it's actually worth.
It sounds as though your car would have to suffer
some major damage in order for an insurance company to total it, but it's actually a function of the car's
worth. Minor damage to a 15-year-old Buick might result in totaling the car, while major damage to a
brand-new Saab might not. Auto insurance claims adjusters usually determine a car's actual cash value by
using their company's proprietary database of prices. Generally speaking, insurers use the National
Auto Dealers Association (NADA) Official Used Car Guide or the Kelley
Blue Book as secondary sources only.
But what if you don't agree with your insurance
company's assessment of the damages? What if you really love your car and you don't want them to take it
away? Do you have any recourse?
Yes and no. When you buy an auto policy, you sign a
contract with your insurance company. You can't force your insurer to pay out more than your car is worth:
That's part of the contract. But, as Bob Hunter of the Consumer Federation of America says, you're supposed
to be "made whole" by your insurer. "You should be put back into relatively the same spot
that you were before the accident," Hunter tells
insure.com.
Where are they taking my baby?
If the cost of repairing your car exceeds a percentage
of the insurance company's estimates of its worth, your car is a total loss. Some company total vehicles at
51 percent of its actual worth; some total at 80 percent. The insurance company will pay you the car's
actual cash value, minus any deductible on your coverage. Then the car goes to a salvage yard, where it's
auctioned off to the highest bidder and usually chopped up for parts. The insurance company keeps whatever
money it got for the car in salvage.
If your car is a total loss but you want to have it
repaired anyway, you should be able to retain it. Your insurer still has to pay you the car's actual cash
value, minus the deductible and minus what the company would have gotten for it at the salvage yard. You
should let your claims adjuster know up front that you want to keep the car. You're then going to have to
pay for the repairs yourself.
Make sure you think your decision through. If you
decide to give up your car but then you change your mind, you're going to have hard time buying it back at
auction.
"There's really no need to give the car to the
salvage yard and have the insured go through [the auction] process when we can just turn it over to the
insured directly," says Mike Treviρo, a spokesperson for USAA. However, you may not be so lucky with
your company. Sharon Frazier, a spokesperson for State Farm, the nation's largest automobile insurer, says
that the company looks at each situation on a case-by-case basis. If your car is a newer model and its parts
would fetch a lot on the auction block, your auto insurance company may decide to send it to salvage despite
your protests.
License to buy
In most states, your car is gone for good once it goes
to auction. Regulations vary, but in many places you won't even be able to attend the auction without a
special license for auto salvagers or auto dealers. It's good to call the auction house beforehand to see if
you will need a license in order to bid on your car.
If you do get your car back from your insurer,
you'll be left with a badly damaged car and only a fraction of the money needed to repair it. "You
could do it that way but you've got to be realistic," says Hunter. If the car is really beyond repair,
you'll be left with a carcass of a car and a check that's not quite enough to buy you a new one.
If the car is repairable, make sure you have all the
necessary work done. Insurers can refuse to completely cover a car that's been totalled if it hasn't passed
a department of motor vehicle inspection often a necessary step in getting your car back on the road. As
long as it passes DMV inspection, however, you should have no problem buying liability insurance. Physical
damage coverage comprehensive and collision insurance is a different story. Some insurers won't sell
you physical damage coverage if you're driving a previously totalled car. (For more about the inspection
process, turn to Inside the insurance
auto-auction pipeline.)
David Smolensky of the National Association of
Independent Insurers offers this sage advice: "Move on. The car's been
totalled."
The price is wrong
Hunter says the majority of the complaints he hears are
not from people who want their old, crashed cars back, but from people whose insurance companies didn't give
them enough money to buy a similar car. "If I had a five-year-old Toyota Cressida, I have a right to
get a five-year-old Toyota Cressida with comparable miles and comparable options," Hunter explains.
However, your insurance company's estimate of what that comparable car will cost may differ from the
realities of the marketplace.
If you don't agree with your insurer's estimate of
your car's actual cash value, you can choose to bring in an independent appraiser probably at your own
expense. "It could be that two or three appraisers are brought in," says Frazier of State Farm.
"If one appraiser is $2,000 apart from the other, you'll need another one to come in to settle the
matter."
Bring in the lawyers
If negotiating with the insurance company brings no
results, you do have two more options: arbitration and litigation. Arbitration is a process for settling
complaints that's less of a hassle than actual litigation. It can be binding or nonbinding; with nonbinding
arbitration, you can still take the matter to court if you're not satisfied.
Hunter cautions that arbitration while less
costly and time-consuming than a lawsuit is more likely to go in favor of the insurance company.
"You're always at a disadvantage when you take it to arbitration because [the insurance companies] have
more practice with it," he says. Arbiters have to deal with these insurance companies all the time, so
they're not likely to want to get the companies steamed, he adds. You can bring an attorney with you to
arbitration, which may increase the odds of a satisfactory outcome for you.
While landing in a courtroom over a totaled-vehicle
settlement isn't very likely, knowing your options is an advantage that consumer advocates continually
stress: "An informed consumer is the best defense against unfair settlement practices."
|
