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Smashed carAn accident occurs, damaging your car significantly. You file an auto insurance claim. But, the damage is significantly higher than what your maximum coverage is. What happens next? This depends on the incident, the coverage you have, and several other factors. Here is what you need to know.

Damage to Your Car

If you cause damage to your car, you may have auto insurance if you have collision insurance. Collision insurance protects your property. In some situations, your coverage should match the value of the car. Most policies specifically state it will cover the value of the car at the time of the incident. But, this can pose several problems for owners.

You Owe More on Your Car

If you owe more on your car than the auto insurance says it was worth right at the accident, you may have to pay the difference out of pocket. For example, you buy a car for $10,000. Over the next year, the car’s value depreciates to $7,000. That's likely the most your insurance will pay. But, you owe $8,000 on it. If the insurer totals your car, you still have to pay the $1,000 on your own plus the deductible.

Your Insurer Totals the Car

In some situations, the insurer decides it is too expensive to make the repairs to the car. It decides to total the car. When this happens, the car insurance writes a check for the value of the car just prior to the accident. If this is not enough to cover the loan or amount you owe, you have to continue to make payments on it. Essentially, you'll have to make payments on a car you no longer have.

What If You Do Not Agree?

In some situations, you may not agree with the decision the auto insurance company made. You may believe the car is worth more than what they will pay you. You have the right to dispute the claim with the insurer. You can do this simply by requesting more information and for an adjustment to the claim. Provide any documentation you can to verify your beliefs. This can determine if they will adjust the value. You can negotiate with your insurer.

It is important to update your auto insurance frequently. If you owe more than what the vehicle is worth at any time, consider purchasing gap car insurance. And, be sure you discuss your concerns with your policy with your agent. Review your policy each year to know what coverage you have.

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