The Liability Insurance Formula
Liability insurance limit amounts are given as three numbers separated by slash marks, for example, 50/100/50.
In this case, the first 50 means $50,000 and refers to the amount of bodily injury coverage per person covered by the policy. The 100 means $100,000 of bodily injury coverage per accident. The last 50 refers to the amount of property damage liability per accident, which would also be $50,000.
Keep in mind that bodily injury liability is per person, while property damage liability is per accident. If you hit three people and three cars in the same accident, your insurance will cover you for up to $100,000 for the bodily injuries of the people you hit and only up to $50,000 for all three of the cars. In this scenario, you would probably max out the policy, and you would be held liable and possibly sued for any remaining bills.
Does Liability Insurance Cover My Car If I Am At Fault
Liability protects anyone you hit in an accident. It doesn’t cover your medical expenses, damage to your car or other losses you experience. You will not only have to pay for the damage to the other person’s car, but you will also have to pay for the damage to your own vehicle out of pocket. If you opt only for liability coverage, you will need to cover any injuries you sustain in the accident, either with your health insurance or out of pocket.
What Car Insurance Coverage Is Required
At the very least, your car insurance policy will include your states minimum required coverage types and limits. While minimum car insurance requirements vary by state, the main types of insurance coverage you could be required to get are:
Liability insurance, which pays for expenses due to an accident you cause.
Personal injury protection, or PIP, or medical payments, or MedPay, to cover your own medical expenses after an accident, no matter whos at fault.
Uninsured and underinsured motorist coverage to pay for damage from drivers without car insurance, or without enough to pay for damage they cause.
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How Much Does Gap Insurance Cover A Totaled Car
If you purchase the right amount of gap insurance, it will cover the remaining value of your loan after your car is totaled, after your regular auto policy pays. Lets say you purchase a $40,000 car, then total it a year later. Your car may only be worth $28,000 by this point, but youve still got $35,000 left on your loan. Gap insurance will make up that $7,000 difference not covered by your standard auto policy.
When shopping for your gap insurance policy, youll need to work closely with your independent insurance agent to get the amount of coverage thats right for you. How much coverage you need will depend on the type of car you buy, how much its worth, the length of your loan, whether youll be making a down payment, and other factors. Be sure to walk away with a policy that makes sense for you.
What Happens If You Owe More On Your Loan Or Lease Than Insurance Pays Out
The insurance company wants to know if you have a loan or if the car is leased. Then they will want to know if its a loan, how much do you owe, Miller says. Thats because you might owe on the vehicle more than the carrier pays out, or you might not be current with payments on your car loan.
If you havent made payments, or are upside down or late, now there is a gap what you owe and what youre getting paid, Miller says. You are responsible for the shortfall, but if you have gap insurance with your auto policy, this is where it kicks in.
Gap insurance bridges the difference between what you owe and the amount of the payout from the insurance carrier. If you dont have this optional coverage in your policy, then you need to come up with the rest.
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Consider Your Net Worth
How much liability insurance you need can also depend on your net worth. If you have a lot of assets such as a house, car or sizable bank account and not much debt, you may want to purchase more liability insurance to cover your net worth and prevent assets from being taken in a judgment. You may even want to consider an umbrella insurance policy to provide extra liability coverage.
How Much Will The Insurer Pay
Insurers will only pay damages up to the policy limits. For example, if the other driver was at fault and caused $25,000 of damage to your car, but he/she only has $10,000 of property damage coverage, his/her insurer will only pay $10,000 toward your repair costs. Insurance-wise, the only way for you to get the remaining $15,000 of repair costs would be from your own collision coverage, if you have it.
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What Does Property Damage Liability Insurance Cover
Property damage liability coverage generally pays for:
- Vehicle damage
- The cost for the other party to rent a replacement vehicle while repairs are completed
- Damage to buildings, homes or businesses
- Damage to fences, mailboxes and other structures
- Lost business revenue
- Related legal expenses
Your property damage liability coverage pays for damage caused by you to other peoples property. It does not help with damage to your own vehicle or damage to a vehicle owned by a family member who lives in the same household as you. To help cover repairs for your vehicle, you will need collision coverage.
The above expenses are all covered up to your policy limit. Any costs that exceed your policy limit may become your personal responsibility, even if you have liability insurance.
Research Your Cars Value
Not only should you understand your cars current value in the marketplace, but you should also research how much any accessories and after-market items are worth.
These are extra features add value to the vehicle and increase your final settlement amount, says Espenschied, who cites the case of a moonroof, audio and video equipment, and an upgraded trim package that an adjuster did not take into account when evaluating a car totaled because of hail damage.
The more knowledgeable you are on this subject, the better you are able to negotiate with the insurance carrier for your payout.
Consumers dont realize they can negotiate for a higher settlement amount based on the current market availability of the same vehicle, Espenschied adds.
Consumers should insist that they get all the costs of replacing the totaled car, Heller says. This includes the taxes and fees associated with buying a replacement car, as well as the refund of the license or registration fee from the totaled vehicle based on the remaining term of that registration. For example, if you paid $120 for the annual registration of your vehicle one month before your accident, you should get $110 added on to your claim settlement to cover the unused portion of the old cars fee.
Of course the insurance carrier may not see the value in your car the way you do, and the payout may not equal what it costs to purchase a new car.
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Denial Of Coverage After A Dui
A liability car insurance policy typically provides coverage for any accident in which the policyholder drives in a negligent manner — and perhaps even in a grossly negligent or reckless manner, depending on what the policy says — and causes a car accident. But no car insurance policy covers car accidents caused by intentional conduct.
Some automobile insurers like to argue that drinking and driving is intentional conduct, since that argument will allow the company to disclaim coverage for damages resulting from a DUI — whether injuries and vehicle damage sustained by the driver and/or passengers in the vehicle you hit , or your own losses .
The insurer’s argument here is that the driver intentionally put him or herself in a position to cause the accident — i.e., the driver intentionally drank alcohol, intentionally got drunk, intentionally drove after getting drunk, and knew that drinking and driving is extremely dangerous.
If you cause an accident while you are intoxicated, your auto insurer will at least investigate the circumstances of your crash before it agrees to accept liability for any damages.
If your insurer is denying coverage for bodily injury, you might need to hire a lawyer to try to convince the insurer to change its mind.
How Much Is A Totaled Car Insurance Payout
An insurance company will pay the actual cash value of a totaled car. The ACV is how much a car was worth immediately prior to being damaged, taking into consideration factors such as age, make, model, and condition.
Once you and the insurer agree on a value, you will be paid that amount minus any deductible. In some states, the payout will also include the taxes and fees associated with purchasing a replacement car.
Learn more about how much a totaled car payout is.
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What Happens Next If You Total A Financed Car
Assuming youre covered, your insurer will send a payment to your lender for the actual cash value of the car, minus any deductible. Make sure you give your lenders contact information and the account number to your agent or insurance company. If your car is totaled and you still owe on it but the accident was not your fault, contact the at-fault drivers insurance company with your lender information.
To maintain your good credit, you should to continue to make your loan or lease payments until the insurance company issues payment to your lender. If you dont have insurance or dont have enough coverage, youre on the hook for the balance left on your vehicle even though the car is no longer drivable.
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If the car was stolen, you are not liable for any accidents the criminal got into, since you were not at fault. The criminal/driver did not have your permission to drive the car, so you are not responsible for what he/she did. That doesnt mean the other side may not try to sue you, but if you can prove theft, youd have a good defense.
Legally, you are not liable for the car damages to the other persons car IF your car was stolen and involved in a hit-and-run traffic accident. Since you had nothing to do with the theft, you have no liability for what the thief did, and therefore do not have to spring for any bills incurred from the hit and run. Furthermore, since the car was stolen, your insurance company is not obligated to cover the damages caused by the actions of the thief either.
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Will A Comprehensive Claim Raise My Auto Insurance Rates
According to Insure.com’s rate analysis, a comprehensive claim only raises rates by an average of 3 percent, or $39 a year. The average comprehensive rate is $189 annually. That’s on top of average of $523 for collision.
Many companies don’t raise your rates at all for one comprehensive claim. Before making a claim though, gauge the extent of the damage.
If it is relatively minor, you may want to get it checked out by a mechanic to make certain the damage will cost more than your deductible. There is no need to make a claim if repairs will cost less than deductible as your insurance benefits only kick in after the deductible has been met. Make the claim if it’s extensive damage to begin with or your mechanic “opens up” the car and finds major issues.
Uninsured And Underinsured Motorist Coverage
Uninsured motorist coverage pays costs that result from an uninsured driver hitting you. About 1 in every 8 drivers don’t have car insurance, according to a 2019 study by the Insurance Research Council.
Underinsured motorist coverage pays out when the at-fault driver has insurance, but their limits are too low to cover all of the damage.
Some states require a minimum amount of uninsured or underinsured motorist coverage. Here are four coverage types that may be required:
Uninsured motorist bodily injury coverage, or UMBI, pays for medical expenses caused by an uninsured driver.
Uninsured motorist property damage coverage, or UMPD, pays for repair expenses caused by an uninsured driver.
Underinsured motorist bodily injury coverage, or UIMBI, pays out if the cost of injuries and repairs is more than an at-fault drivers bodily injury liability limits.
Underinsured motorist property damage coverage, or UIMPD, pays for repair costs that surpass the at-fault drivers property damage liability limits.
How it works: A driver rear-ends you at a red light. When you go to exchange insurance information, you discover the driver has none. Your UMPD coverage pays to repair your bumper, while UMBI coverage pays for medical expenses.
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What Happens When Your Car Is Totaled And You Still Owe Money
If youre leasing your car, the insurer will pay the leasing company first. If you have an auto loan, your insurer will first pay off the loan before paying you any money. If your car is worth more than you owe, you will be paid the balance.
However, if you owe more than your car is worth, you still owe your lender the difference. A gap insurance policy, if you have one, can protect you from this risk. Otherwise, youre on the hook for the balance of the loan.
Learn more about what happens if you owe money on a totaled car.
Total Loss Claims And Actual Cash Value
PD is mandatory in every state, but the only way to receive a payout from it is to file a claim against another drivers PD. For you to get compensation from PD, the other driver will also need to have been negligent in the accident.
The easiest and most sure way of getting payment for a total loss is through your own insurance company, which you can do through collision insurance. With collision claims, it does not matter whether you were at fault though you will have to pay your deductible before the insurer will cover the claim.
Assuming you have these types of coverage in place and that you are not injured or busy seeking medical careyour first step after the damage occurs would be to file a claim with your insurer asyou would any accident. A claims adjuster will come to inspect the vehicle to assess the damage. It is here where the total loss designation will be made.
About half of states use what is called the “total loss formula” , where if the sum of the cost of repair plus the salvage value of the car exceeds the cars ACV, then it is considered a total loss.
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How Much Does Collision Insurance Cost
According to NerdWallet, the average annual cost for collision coverage is $363. Your costs may differ depending on your personal driver profile. Depending on your provider, you might have to buy comprehensive coverage if you want to add collision coverage. If you’re financing or leasing a vehicle, your lending company might also require you to carry both types of coverage. Insurance companies use several factors to calculate your insurance rates. According to TD Insurance, these factors include:
- The type of vehicle you drive.
- How old your vehicle is.
- The rates of vehicle theft in your ZIP code.
- The amount of coverage and deductibles you choose.
- Your driving record.
Circumstances In Which A Vehicle May Be Retitled
In some circumstances the vehicle may cost a great deal to repair, but is still drivable:
- Hail damage to the exterior
- Body damage that affects looks more than drivability
- Cosmetic damage and little mechanical damage
It is worth the time to examine the circumstances of the loss and perhaps consult with an attorney about settling the claim with the insurance company.
You may be able to make a deal with the auto repair company to reduce the cost of repairs so it is worth your time and money to repair the vehicle.
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What Is A Total Loss
For a vehicle to be declared a total loss by an insurance company, it must meet one of several criteria:
- The car would cost more to repair than its actual cash value. State Farm, for example, says it bases actual cash value on the car’s “year, make, model, mileage, overall condition, and major optionsminus your deductible and applicable state taxes and fees.”
- The insurer determines that it cannot be repaired so that it will be safe to drive.
- It meets other criteria for a totaled car under your state’s auto insurance laws.
State insurance laws as well as individual insurers have formulas for determining whether a car should be considered a total loss. Many use a “total loss formula” wherein if the cost of the repairs plus the salvage value of the car exceeds what the car was worth before the accident, it will be considered a total loss. Some states set a “total loss threshold” by which the damage only needs to exceed a certain percentage of the car’s value for it to be considered a total loss.
In New York, for example, the threshold is 75%. So if the cost of repairs plus the car’s salvage value exceeds 75% of its actual cash value, the car is a total loss for insurance purposes.