Insurance companies provide a valuable service to consumers who drive. However, we often find that the customer doesn’t always understand the scope of their policy and how claims work, which can lead to disagreements over coverage and settlements. After a collision, the carrier evaluates the damage to the vehicle and its value. While the owner thinks the car is totaled and wants a new car, the insurance company may see it differently. Conversely, the owner may want to fix the car, but the carrier determines that it is a total loss and cuts a check for that amount.
Determining the value
Insurance carriers weigh the vehicle’s blue book value before and after the crash to decide if it is a total loss. They consider the cost to repair the damage and compare it to the vehicle’s current value after the crash. If the repairs and current value is 75% or more of the vehicle’s worth before the collision, insurance companies consider it a total loss.
Some still owe money
Once the carrier cuts the check, owners are sometimes surprised to find that the insurance settlement is less than what the driver still owes payments to the creditor holding the car loan. The owner also may not realize that the insurer sent its payment directly to the company holding the car loan. The lender may make the balance due immediately since the vehicle, in its eyes, no longer exists. However, they may roll that previous amount due into a new loan for a new vehicle.
There are many options for handling disputes
Insurance policies are complicated, so the owner may not understand what they pay for. Disagreements can happen, but the carrier is well-versed in its contract and what it includes and what it doesn’t. Sometimes the insurance investigator’s findings disagree with the conclusions of the owner. Sometimes the client doesn’t like how the carrier handled the claim. Companies have protocols for addressing these disagreements, but sometimes it is necessary to engage in bad faith litigation to resolve the matter.