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The Headache of Car Accident Compensation

Having a car accident is one the most stressful experiences a person can have in their life. As if the accident itself wasn’t enough, we must put up with medical treatment, insurance companies and, of course, the loss or damage of the car.

Dealing with insurance companies is the biggest difficulty for most people, because one often has to struggle to get the proper car accident compensation. This begs the question: should a person have the car repaired with insurance company’s money, or should we take the actual cash value for the car and set out to buy a similar used one?car accident

Loss of Value

When a car is damaged by an accident it loses value. This value loss is called “Automobile Diminished Value” and it consists of Collision Value Loss and Inherent Value Loss.

Collision Value Loss is the total cost of repairs required to bring your car back to the state it was in before the accident took place. The insurance company will pay it only if it amounts to less than 70% of the car’s Actual Cash Value (ACV) prior to its destruction. Otherwise, your car will be proclaimed “total loss” and you will be paid the ACV of the car. Edmunds.com states there are other factors and dealer surveys, such as sales tax, registration, and title costs.

Inherent Value Loss (IVL)

Inherent value loss is the value lost due to the accident. If a car has been damaged severely, that is going to be written in its record and if someone checks your car history it will be labeled as “Accident damage”. If you try to sell your car in the future, this tag will affect its price significantly. The Inherent Value Loss is the biggest for luxury cars and immediately after the accident.

This is mostly because of the characteristics of the market of used cars. If you decide to keep your car after the repairs are done, the Inherent Value Loss will diminish over time. The reasoning behind this is that if your car doesn’t break on it’s own after the accident and repairs, then it is considered reliable and the repairs have actually brought it into the state before the collision.

The insurance companies do not cover Inherent Value Loss and their official attitude toward the issue is that adequate repairs will bring the car into its previous state. Although the value of the car will diminish, they insist on turning a blind eye on the subject. If the Inherent Value Loss is big in a particular case, the matter has to be settled in court.

Cash or Repairs?

So, again, the question is should you insist on repairs with the insurance company or take the compensation money and buy a used car similar to the one you lost?

If the damage is minor and the repairs are inexpensive, then you would lose more by selling the car than keeping it. However, if the damage is extensive, then you have to insist with the insurance company that they pay you the ACV of the car.

Important Information

Be very careful, because the appraisal you get from the insurance company may not be realistic if a mechanic they contracted does it, which is mostly the case.

You should always get an independent appraisal, so you can be sure that all is done in your favor. You can make a rough, but realistic estimate of your car’s ACV by researching offers for similar cars online. There are many used cars for sale in other regions of the country. Don’t be lazy and do the research, as you can easily lose a lot of money if you fail to adequately handle the situation.

Karrie Dubose

Karrie Dubose

Karrie graduated from the University of Washington in Seattle with a B.A. in Media Relations and Communications and a Minor in Diversity. She enjoys traveling and writes regularly for State Farm Seattle.

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