When Your Car is Totaled in an Accident

When a serious accident occurs and the car is totaled, the insurance company will pay out on the claim. The amount the customer will receive is not the full replacement value of the vehicle, though. The insurance company’s obligation is to bring the customer back to the same position he or she was in before the loss occurred.

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The insurance company will pay based on the cash value of the vehicle. For a person who has collision or comprehensive coverage on the vehicle, the benefit payable will be the value of the car at the time of the accident, less the policy deductible.

Cash value on a vehicle is determined by comparing it to ones that are similar in make and model. The number of miles that a car has been driven is also considered when determining its cash value. An insurance adjuster can gather this type of information from local car dealers or by tracking recent sales. The insurance company may also use a computer program to determine the value of a particular vehicle.

In a situation where the cash value of the vehicle is less than the amount owing on it, the owner may want to consider buying “gap” insurance to make up the difference between what the car is worth and the amount that is still outstanding on the loan.

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