What happens when you get in a big car accident?
The insurance company will make a decision on whether to “Total” your car or pay for the repairs. They determine a percentage of the market value (varies by state but let’s say 75% of the market value) for your car and compare that to the cost of fixing your car. If the cost is too high, they declare your car totaled, cut you a check for the cash value of the car minus your deductible, and take your car away to be sold for salvage. At the salvage, some people may fix the car and resell the car or they may chop it for parts. The insurance company keeps what it got from the salvage sale. That math doesn’t add up to me. Notably, some cars parts sell for more than the cost of the car as a whole. You can imagine it is possible for the insurance company to make a profit by totaling your car.
One day we had a storm which caused a tree limb to fall on top of our trunk. It certainly caused a big dent on the back of the car and broke a tail light. Given that the car is not that old and the damage was no where near the frame or major electronics or functions of the car, we figured the insurance should just fix the car. We took the car to the auto body shop suggested by our insurance company. The estimator came out of the shop and noted the issues and mentioned that he would get back to us in a couple of days after speaking with the insurance company. We did manage to get him to suggest a ball park estimate to fix the car. He did not want to be quoted but he felt like the repairs should come in well under the market value of the car. We went home thinking that we should be able to get the car sorted within a week or so.
Two days later, the insurance company calls us to tell us the car is being totaled. It was quite shocking to hear this turn of events. The insurance guy went on about how much hidden damage there was to the frame. Its quite obvious he didn’t even look at the pictures taken by the auto body shop. Somehow the estimate to repair the car ballooned beyond the unofficial estimate of the body shop. We checked with the shop and they confirmed the new estimate. Without knowing more about the situation, the optics are very fishy, In the blink of an eye, we were pushed to accept the decision and take the payout from the insurance company. The car was towed away for salvage before another blink of the eye. We were left to fend for ourselves and buy another replacement car to get on with our lives.
Later, we did some more research and learned more about what we could have done differently in terms of using different body shops than suggested by the insurance company and keeping the totaled car with the insurance payment adjusted by the deductible and the cost of salvage. Knowing the insurance company, they probably would come in with a high salvage price to wipe out most of the insurance payment. You probably would have difficulties to insure the car also. So, the option of keeping your totaled car would have some issues that might cause you to give in to the insurance company anyway. But at least the insurance company should disclose that you have that option. Its quite clear that the insurance company does not have your interests in mind. With this experience in mind, I am more inclined to drop my comprehensive coverage sooner. If I do need to do anything involving the insurance company and auto body shop, I would be sure to find my own auto body shop to handle the estimates and repairs.
Ultimately, my lesson learned is to beware of shady dealings by the insurance companies to avoid paying what you are entitled to.