- the cost of repairing your car (or the value of the car if it was totaled)
- the cost to repair or replace any other personal property that was damaged in the accident
- the cost of a rental car.
- the cost of towing and storage, and
- the amount that your car's value was diminished as a result of your accident.
The at-fault driver's car insurance policy usually kicks in to cover these costs. However, both parties should know the steps after a car accident that will protect them most. Let's take a closer look at each of the costs though.
Repairing Your Car Damage
The person or the insurance company paying for repairs must pay the cost of repairing your car damage, unless your car is not worth that much. If your car is worth less than it will cost to repair it, your vehicle is "totaled" or a "total loss." In that case, you are entitled to the actual cash value (ACV) of the car before it was damaged.
Learn more about Getting Your Car Repaired the Right Way After an Accident.
If Your Car is a ‘Total Loss’
If it will cost more to repair your car than it is worth, your vehicle is "totaled" or a "total loss." If your car is a total loss, instead of repairing your car, the insurance company only has to pay you the actual cash value (ACV) of your car before it was destroyed.
Actually, if the estimated cost of repair is at least 75% to 85% of the value of your car, most insurance companies will "total" the car.
Why? Because they are concerned that they will end up paying more than the value of your car if they authorize the repair and then get "supplements" because of previously unseen damage, have to provide a rental car for a long time while the repairs are being done and then have to pay you for your car's diminished value.
How is your car's ACV determined?
ACV should be what comparable vehicles are selling for. In theory, you should be able to take the money that you are given and use it to purchase the same vehicle that you had. At least, that's the theory.
In making a settlement-compensation offer to you, the insurance company may rely on statistics from a company that it employs to provide these ACVs. Unfortunately, there are a number of such services competing for insurance company business. Do you think that insurance companies tend to hire or retain companies that come up with higher prices for totaled cars, or lower prices? Lower, of course. Therefore, you should do your homework and research the value of your totaled car so you will know whether the insurance company's offer is reasonable.
To combat insurance company funny numbers, you should check for values of comparable vehicles at reputable online services such as Kelley Blue Book or Edmunds.
You should also look in the paper and online for similar cars that are for sale in your area. Admittedly, this tells you what the cars are offered for, not what they are sold for, but this information can be helpful in determining the ACV.
In addition, you should gather information to prove that your car was worth more than similar cars, if it was. For example, if you had just put on new tires, get the records of that purchase. If you recently had extensive repairs done, pull out your documentation. In short, put together whatever information you have that shows that your vehicle was worth more than other similar vehicles.
Armed with that information, you can negotiate with the insurance company if you disagree with their offer.
What alternatives do you have if you can't reach an agreement with the insurance company on the value of your totaled car?
If you are dealing with your insurance company under your collision coverage, you can employ the "appraisal clause" that is probably in your insurance policy. Basically, this means that you and your insurance company submit the dispute to arbitration. Independent appraisers determine the ACV of your car. Look at your policy to determine the specifics of how this works.
If you are dealing with the other driver's insurance company, you can always sue them, or their driver, whichever is proper in your state. The problem with this, of course, is that lawsuits take time. If you can't afford to get another car without the money for your totaled vehicle's ACV, as a practical matter, you may not be in a very good position to hold out while a court case decides whose appraisal is right.
Even if you use an expedited court case, such as small claims court, the time until you get a court decision will still be measured in months, not days or weeks.
Learn more about Disputes Over the Value of 'Totaled' Vehicles.
Damage to Other Personal Property
You are also entitled to have repaired or replaced any personal property that was damaged in the accident, such as your mangled golf clubs that were in the trunk where your car was hit, or the laptop that was thrown off the front seat and damaged.
If you are dealing with the other driver's insurance company, they must pay to repair the property or, if it can't be repaired, they must pay you its value when it was destroyed. Note that market value is probably less than replacement cost.
If you are dealing with your insurance company under your policy, there may be limitations on the amount your company must pay and certain types of property may be excluded from the coverage.
Getting a Rental Car
While your car is being repaired, you will probably need replacement transportation -- a rental car.
There are three places that you can look for payment. What are they?
One is the at-fault driver's insurance company. If the other driver's insurance company is paying to repair your car under their policyholder's liability insurance, they must also provide a rental car. This insurance company will probably establish an arbitrary amount that they are willing to pay for your rental, and the amount may not be enough to cover the cost of a rental that is comparable to your damaged car. Translation: they will want to give you the smallest, cheapest tin can on the rental car company's lot.
This is bogus and the insurance company knows it. That is why they may be able to be persuaded to authorize a replacement that is comparable to your car, not just basic transportation.
If you need a larger vehicle because of work requirements or because you have kids in car seats, or for some other good reason, fight for what you need. If you are insistent, you will usually get what you need -- at least on this issue.
If you don't get the vehicle you ask for, and you can afford it, pay the difference between what the insurance company authorizes and the cost of the rental car you really need, and then add that expense to any other claims you make against that company. Don't sign a release of your property damage claims, though. If you do, you waive your right to claim the additional rental amount.
You should also send a consumer complaint of any unfair practice to your state's insurance department.
Second, you can look to your own insurance company, if you have rental reimbursement insurance. If you are dealing with your own insurance company, you will be given the amount that you purchased as rental reimbursement coverage when you bought your car insurance. You will be entitled to a certain amount per day, or a total amount, or both.
Where is the last place that you can look for payment for a rental car? In the mirror. If you caused the accident and you don't have rental reimbursement insurance, you pay for the rental car, or do without.
Towing and Storage
Often, there will also be charges for towing your car away from the scene of your accident and charges for storing your car while arrangements are made for its repair -- or to total it.
If you are dealing with the other driver's insurance company under that driver's liability insurance, these charges are the responsibility of that other driver's company.
If you are dealing with your own insurance company, your insurance company only has to pay for towing and storage if you have purchased insurance that covers those things.
Making a Diminished Value Claim
In the ordinary situation, after your vehicle is repaired, it will be worth the same amount that it was worth before it was damaged.
However, if the damage was extensive and especially if your car is fairly new, there is a good chance that your car will not be worth as much after it is repaired as it was worth before it was damaged.
A claim for the difference is called a diminished value (DV) claim, or a diminution of value claim or a reduction in value claim.
This claim is based on the common sense notion that a reasonable buyer won't pay as much for a vehicle that has had extensive damage repaired as she will for the same vehicle that has not had extensive damage. Would you?
You are entitled to be paid the amount by which your vehicle's value has been diminished. However, except in a small number of states including Georgia and North Carolina, you can only make a DV claim against the other driver's insurance company, not against your own car insurance company.
Learn more about Making a Diminished Value Claim After a Car Accident.