You Could Have a Problem if Your Car is Too Damaged in an Accident
There is a bad situation for people in car accidents, who may be facing financial trouble. You may well be so injured that you cannot work. But even if your injuries don’t completely stop you from working, something else may: not having a car, if your car was damaged in the accident.
What About Insurance?
But wait-you do have property damage insurance, which will fix your car, and get you back on the road, and back to work. Well, you certainly may have property damage insurance…but getting back on the road isn’t such a sure thing.
Fix or Replace?
That’s because when your car is damaged in an accident, your insurance company actually has a choice. Yes, they can just opt to fix your car. But they also can opt to declare your car a total loss, trash it, and pay you the current fair market value of the car. They can do this if the cost to repair the vehicle, would exceed a percentage of the total value of the car—usually about 80%.
Real that paragraph again—we didn’t say insurance has to buy you a new car, or give you the value of your car, when it was new. They only have to pay you the current fair market value of the car.
This can lead to two major problems:
1) For people who are upside down in value—that is, they have a balance on their loan that is more than what their car is worth—they will get paid the value of their car, but they will still owe money to the finance company. The money they get for the value of the car, doesn’t cover the balance of the loan. This means you will both owe money, and possibly, not have the money or the trade in to help you buy another car.
2) For people who have cars that are completely paid off, with no car payment, they now have some cash from the insurance payment—but not enough to buy a new (or possibly, any) car. Now, to get a new car, they will have to finance, and make the payments, increasing their monthly expenses.
Note that you can avoid this problem in advance, by getting gap insurance. Gap insurance “fills in the gap” between what you owe on the loan, and the value of the car if the insurance company totals it. Obviously, it is insurance you would have to have in place before your accident.
EVs Have Problems
Many owners of electric cars, particularly Teslas, are having a problem, given how very expensive they are to fix. EV owners are finding that even minor impact accidents are causing damages that are so expensive to fix, insurance companies are opting to trash the vehicles and pay out the market value of the cars, instead of fixing them.
Call the Knoxville personal injury attorneys at Fox Farley Willis & Burnette, PLLC, for help today with your injuries, your property damage, and any other problem after your car accident.