Last Fall, I had the misfortune of being on the receiving end of a rescue scenario for which, as a former firefighter and EMT, I had trained and performed numerous times: an auto extrication.
As I passed through one of Boston’s beloved rotaries (traffic circles for you non-New Englanders) I was met with the force of an unyielding driver who took on the rotary like a Frenchman and tipped my top-heavy Ford Escape onto its side. Priorite de droite!? Non, c’est l’Amérique! Merde.
Luckily, the experience of playing a trapped driver during my fire department’s drills translated somewhat to the real-life event. After a tirade of swearing and calling 911, I was able to talk myself through exactly what was about to happen next. So as the panic set in from having been flipped onto my side and realizing my seatbelt had jammed, I was relieved by the sound of the fire engine and ambulance sirens (the back-pain, not so much).
I was not at fault in my accident and, fortunately, I had car insurance. As the crew pulled me from my torn up Escape, I overheard them say “Dang, somebody’s getting a new car.”
“Heck yeah, I am. Wait… No, I’m not, I still owe money on this. Crap… will I even get enough for a down-payment? What do I do, now?!”
However prepared I might have for becoming an auto accident victim, after the dust settled and my discharge from the hospital, I faced a situation I was completely unprepared for: being an auto insurance claimant.
Unfortunately, what I perceived it meant to have insurance contrasted sharply with the reality of what it means to depend upon your auto insurance to make you whole. In short, it takes the two things of which you never seem to have enough: money, which you hope you’ll get back, and time, something for which you simply can’t be reimbursed.
Even with insurance, car accidents are expensive
Getting into an accident is expensive. Yes, you can get some of it back, but don’t expect a fat check before you need cough up some major dough for the living expenses that will come during the weeks following your crash.
Naturally, this is the perfect time to plug that having an emergency fund is absolutely essential to your financial security. Not just for the expense of a rental car or downpayment for a replacement vehicle, but also for the one thing I was absolutely unprepared for: being forced to take unexpected earned time.
In addition to having the cash on hand to pad a few weeks without a car, make sure you have enough vacation days, or short term disability plan, to cover any time you may need to take off from work after an accident. If you expect (read: need) to be paid during your time off after an accident, you should know that most auto insurance policies will only provide reimbursement that’s not covered by vacation or sick days — and only 80% of your regular wages, too.
In my situation, the implications of taking several days of unpaid leave were not worth 80% cash in hand, even though it would cost me dearly in earned time hours. The lesson to take away from this? Understand how your employer would support you in this situation, and how you should reach out for help. Whether it’s using vacation, sick, or earned time hours, you should know what actions you should take if you suddenly need a few days off, and the expense that may result.
Whenever a national auto insurer pops on the TV screen, they tout their customer satisfaction scores, ease of claims processing, and ensure you peace of mind as their customer. Unfortunately, when the complexity of your accident goes up, so does the amount of time it takes for things to get settled.
Contacting the insurance company after the accident
After receiving the incident report from the police, my fiancee contacted Geico with the incident number and began the process of filing for a claim while I was still on the backboard in emergency room. Right off the bat, she was given the name and number of not one, not two, but three different agents that we would need to deal with throughout the claims process.
The first agent was the medical claims representative, who would be making sure that the bills we acquired following the incident would be covered up to the limit of your policy. In my case, my coverage didn’t even pay the entire ambulance bill. So, her job was simply to pass along the rest of my bills to my health insurance. Out of pocket expenses? For me it was a $100 co-pay. Without health insurance, that ER visit would have cost $12,345.
Second on the list was our claims adjuster, who operates in the field and assessed the damage done to my vehicle. His job was made relatively easy by the fire department’s robust work with the jaws of life — the Escape was a total loss.
Unfortunately, the adjuster’s job bounces him between claims across a wide geographic region and he is constantly on the phone. Between playing telephone tag and dealing with the impound lots hours, it took 9 business days — nearly two weeks after the accident — to receive my check.
Lastly, there was a separate agent assigned to reclaiming my deductible and would keep me posted as a decision was reached. This process took an absurdly long time, nearly six months, as the other driver’s insurance company wasn’t able to locate the original police report because they “couldn’t figure out who filed it.” Befuddling, I know. Yet all I could do is call, leave a message, and wait another few days to be told “We’re still tracking things down.”
It took half a year to get back the money lost from an accident that was entirely not my fault. I lost out on several hundred dollars in car rental expenses, a week’s worth of earned time, and the freedom of having my own vehicle. Did we make it work? Fortunately, yes. But there was a thin line between this from being an inconvenience and life-altering event.
What did I do right?
First, I was wearing my seatbelt — but that’s beside the point.
Second, I financed well below my vehicle’s value, which kept me from owing money after it was chalked up as a total loss.
Third, while I don’t yet have a full six-month emergency fund, I had enough to cover the incidental expenses that followed without going into debt, or impact our ability to pay our regular bills.
Finally, I had health insurance, without which I would have been looking at a five figure bill to settle on my own.
What did I do wrong?
Although I didn’t cheap-out on my car insurance coverage, there were aspects that I’ve since changed or added.
First, my deductible ($1,000) kept my monthly payment down a few bucks, but it was a big hit to have waited as long as I did to be reimbursed.
Second, I didn’t opt-in for rental car coverage. Especially in a city like Boston, rental expenses can be prohibitively expensive. And while my fiancee and I made due with one car, it was another big hit to our quality of life that left us depending on a much less reliable vehicle.
Most importantly, I allowed myself to not understand what it truly means to be covered by auto insurance. At the end of the day (or year) you might get what’s owed to you back. But without understanding the process of submitting a claim, or knowing exactly how much an incident like this would cost, I allowed myself dangerously close to letting an errant driver break apart the financial security I’d worked so hard to obtain.
Liberty Mutual provides claim processing directly through its app or website, and I’ve found is really straightforward and easy to use. Just choose the File a Claim option and input all applicable information. Once your claim is in the system, choose Manage Claim for updates to the claim process. Once you’ve filed, the next step is to get the damage reviewed, which you can do through the app, as well, using Liberty Mutual’s network of repair shops. Best of all, if you ever need help, just pick up the phone and talk to a customer service representative, who will work with you to make sure your claim goes through smoothly.
So now might be a good time to check — how does our car insurance stack up? You can learn more about car insurance coverage options here or check out insurance policies in your area.
How to get a new car after a total loss
You’ve dealt with your insurance company, but now you need to get a new car. Luckily, there’s plenty of options!
If you drive often and love the idea of owning your own car, buying a car outright is your best option.
For the budget-conscious, buying used is a must. If you know the cars that last the longest, you can make a used car last years, while a new car loses its value as soon as you drive it off the lot.
Plus, as I’ll discuss in a little bit, buying used is much more cost-effective.
You can always buy a new car, but leasing has become more popular, and for good reason. Many folks don’t drive a lot, but need a car to visit family and make grocery store runs, but can walk to work, restaurants, etc. In that case, leasing makes sense, especially if you can find a lease payment that’s less than a purchase payment on a new or used vehicle.
Another reason you might consider leasing is if you simply want a new car more frequently. If you like the idea (and can afford) to lease a different car every year, it may not be a bad idea (although know that it’s not the cheapest option).
At the same time, know that leasing isn’t always the right call for some people. Leases can be expensive, and if you cause significant damage to car, you’ll be paying for it.
How to finance a new car after a total loss
When it comes to financing your new car, you have a lot more options than dealer financing (which you should never do unless it’s a really good deal and you have excellent credit). You can get peer-to-peer auto loans, finance through your credit union, or pay in cash (which is recommended).
Peer-to-peer auto loans
This option is for those that have good credit, since all peer-to-peer loans require a high credit score. Peer-to-peer loans are similar to traditional loans, but they’re funded by private investors through sites like Prosper or Lending Club.
With peer-to-peer loans, you’ll still have a payment schedule and you’ll still have to pay interest, but peer-to-peer rates are often better than dealership rates.
Before you get a loan, check out car affordability calculator to see how much car you can afford.
Credit unions are the best place for most loans, and that’s because credit unions are community banks where you can get to know your tellers and they get to know you. That means you have a more personal relationship with the folks who will be lending you money.
Credit unions are an especially good choice for those with average or poor credit, since credit unions can offer better terms.
Finally, your best options is to pay cash, but we recognize that this just isn’t possible for most people. However, that’s another reason buying used is a good idea.
Paying in cash frees you from paying interest and making costly monthly payments. Plus, if you take out a loan to pay for your new car, you’ll often need to get comprehensive insurance. You can choose whatever insurance plan you’d like if you own your car outright.
You insurance company won’t always cover every car accident, especially if your car is totaled. Make sure you know what your insurance will and won’t cover, so you don’t end up in a situation like mine.