It doesn’t look bad but the cost of repairing the park assist, the body work, the tailgate, the punctured radiator, the cracked lights, etc., all adds up!
Near the end of November my husband and I learned about the mess and financial havoc a small collision can have on your financial plan. We were car number two in a three-car pile-up. While driving to the theater with some friends, we had to slow to pass a two-car collision. As traffic worked its way around the collision and accelerated, it once again had to slow and stop due to yet another collision about a mile ahead. The cars in front of us stopped, I stopped and the person behind decided she wasn’t going to stop. In an instant my beloved Volvo XC90 that was paid off, well-maintained, and had no prior incidents became incapacitated. The collision pushed us into the car in front, and the car that hit us from behind did extensive, although not very visible, damage to my car. Oh, you should know that a car can be totaled if the damage is in the range at or above 51% to 80% of its pre-collision value. Each insurer has a different metric, but states usually set guidelines.
Enter the insurance companies and two terms you should be aware of: made whole, and subrogation. Let’s look at each of these.
Made whole is a legal doctrine that means the insurance companies have to pay you first, before they can collect any money. Your damages and injuries come before those of the insurance company’s. One thing to keep in mind is that it does not guarantee you are actually in a financially similar, or better, position as you were prior to your claim. For example, my Volvo had low mileage, had been well cared for, maintained at the dealer, and had no car payment. However, it was just old enough that repairing all of the damage would have exceeded the current book value of the car. I received a settlement on the higher end of the book value so I was made whole according to the insurance company based on the pre-collision value of the car. That is of little consolation for people who plan diligently, have no on-going payment, and intend to get a much longer life out of their car. In this instance, the book value will not come close to replacing the car. That is what you should keep in mind. You are being compensated based on the value of the car at the time of the collision, not the perceived long-term value, sentimental value, or actual state of your car. I could scour the earth and not find a similar car for the amount received.
Subrogation is another term to know. This is when insurance companies are legally able to recover monies from you, they have paid out if, for instance, you were to file a claim for damages and also win a legal settlement. Let’s say you are in an accident and you file a claim for $25,000 in medical bills and it is paid by your insurance company. Let’s also assume you have a legal victory in which you win $50,000 for your medical claim. The insurance company may be able to collect $25,000 of your court award to recover their claim amount paid. The insurer can only subrogate an amount that does not prevent you from being made whole. These two terms can work hand in hand.
This may seem unfair to you and in a way it can be. After all, you were responsible, paid off your car, had no plans to replace it, and now you have to dip into savings, get a loan, or sell other assets to replace your car even if you were not negligent. The same with possibly winning a lawsuit, you won the money. However, without these concepts, insurers would struggle to stay afloat and we would most likely not be able to get car insurance. It’s not a perfect system by any stretch of the imagination, but it is an important system to guard against and mitigate risk.
For the record, my insurance company was wonderful to work with. If you need an insurance review or risk analysis, reach out to me. As an independent Certified Financial Planner™, I can help you identify risk areas and coverage gaps. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #vacation #CFPPro #savemoney #insurance