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By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.


Understanding Your Car Insurance (and Payout)

 Jun 02, 2021
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How do you file a car insurance claim? What do you need to know? How will an accident affect your auto loan? For a lot of drivers, the inner machinations of car insurance are surrounded by mystery and confusion. Unfortunately, it’s a really bad idea to put off reading about your insurance until you have been in an accident. If you wait, you might realize you’re not as protected as you thought.

We understand that insurance can get complicated. So we’ve put together a straightforward overview to help you navigate the rocky waters of the claims process.

What to do when you get into an accident

At the scene of the accident you need to take a few key steps. First, make sure everyone is okay. If anyone is injured, call 911 for an ambulance and do everything you can to keep everyone safe. Move the cars out of traffic if possible, and be very careful to stay out of the way of other traffic while you’re sorting things out.

Even if it’s just a fender-bender, call the police, take pictures, write down as many details as you can, and be sure to exchange names and insurance information with the other drivers who were involved.

Look on your car insurance card for detailed instructions from your insurer. You can usually start a claim by calling their toll-free number as soon as it’s safe to do so.

Emotions can run high, so focus on the basics; keep everyone safe, document everything you’ll need, and avoid discussing who was at fault.

What to do after you get into an accident

If you know what to expect, the claims process should go more smoothly and you’ll get your car repaired as soon as possible.

The first step is to contact your insurer and provide information about the accident. This includes things like the names, contact, insurance and vehicle information for everyone involved in the accident. You should also include situation details, like the location, time of day, and weather conditions. Take pictures of any vehicle damage if you can, and include the names and contact information for the responding officers, the accident report number if it’s available, and the location of the vehicle.

The next step is to work with the insurance adjuster to assess the damage and repair costs. If the damage is minor and the car is still drivable, your insurance company might also ask you to take your car to a repair shop to get an estimate.

The last step is to get your car repaired, of course. When it comes time to pay for the repairs, the insurer might pay the repair shop directly or reimburse you.

If your accident was pretty bad, or your car is older, your car might be ‘totaled.’ A car is usually considered ‘totaled’ if the cost to repair the car exceeds the value of the car.

How your insurance payout affects your auto loan

If your car was totaled and you have collision or comprehensive coverage, your insurer will most likely pay you the actual cash value of your vehicle, minus your deductible. This refers to your car's depreciated value, not what you paid for it, or what’s left on your car loan. You would then be able to use this money to pay off your loan and buy another vehicle.

But what happens if you’re still paying off the majority of your auto loan? In this case, you need to compare the value of your car to your remaining loan balance. If you owe more money than your car was worth, I’m sorry to say you’re still on the hook for that difference. The good news is that this is exactly what gap insurance is for, and it’s worth looking into for that reason.

Understanding your insurance coverage is worth your time

It is crucial that you make sure you understand your insurance coverage. You should know your deductible, and you should look it up right now if you don’t. However, you might not know what else your policy covers. If you have rental car coverage, for example, that will make life a lot easier while you’re waiting for the repairs, but make sure you know how much it covers and for how long.

Many comprehensive policies also include coverage for broken windows or windshields, with a different deductible. Many companies also offer extras like inexpensive or included roadside assistance, or coverage while you’re driving rental cars.

By taking the time to understand your car insurance policy ahead of time, you’re saving yourself from future headaches and financial roadblocks. You don’t need to memorize the entire policy, but knowing what is and isn’t covered means you won’t face another nasty surprise on an already bad day.

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