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Six Secrets for Dealing with Insurance Companies
When it comes to repairing your car after an accident, you have more rights than your insurance company may want you to know
by Peter D. duPre
For most of us, the purchase of an automobile is the single biggest purchase we will ever make apart from the purchase of our homes. In order for them to retain the maximum value possible, it is necessary for us to keep them running well and looking good. Generally, this isn’t much a problem. We visit the mechanic regularly and clean our vehicles often.
Problems begin to occur, however, once the vehicle has been in an accident. Once a car has been involved in an accident its value immediately plummets and unless you can get the vehicle restored to its original condition, its resale value will be diminished. Even a simple little fender bender can substantially reduce the resale value of a vehicle.
You may think that restoring the vehicle to its original condition is simply a matter of having the body shop replace the crumpled parts and giving the vehicle a paint job. Sometimes this is the case. Often it is not. Shoddy workmanship and inferior replacement parts can permanently reduce the value of your investment -- and it may not even be the body shop’s fault. Increasingly, auto insurance companies are dictating the terms of auto repairs in an effort to reduce their costs.
How do insurance companies control the repair? By controlling who they insure, how they cover them – and how much money they will pay on a claim. They may write clauses into your policy that state the use of imitation, or aftermarket parts is acceptable; or they can require that you visit one of their claims centers where they lowball an estimate.
In short, there are a lot of important things the insurance company may not tell you that can cost you money in premiums and in resale value. Here is a list of some of the things your insurance company may not want you to know:
- It’s your credit report, not your driving record. It used to be that insurance premiums were determined by the type of vehicle you drive, your driving record, and the neighborhood where you live. While these things are still part of the equation, more and more insurance companies are using your credit rating to decide if they will sell you insurance and how much they will charge. The thinking is that a poor credit risk is a poor insurance risk because someone who lets their credit rating slip is probably careless about other things -- such as their driving. Sounds far fetched, doesn’t it? Well, you aren’t the only one who thinks so. Currently 12 states have made it illegal to use credit ratings in determining coverage. The credit rating may be used to determine if the carrier will supply the insurance, but not in determining the amount of coverage or the premium rate. Ask your insurance company if they use the credit rating method. Also check with your state’s insurance commissioner to determine if your state has regulations about using credit ratings.
- You don’t need multiple estimates. It is a common practice among insurance carriers to ask you to get three, or even five, estimates of the damage before they will approve your claim. Once they have the estimates, they will often suggest you take your vehicle to the shop with the lowest price, or they will only pay the lowest price. Multiple estimates are not necessary because almost all insurance carriers use appraisers who will go to the vehicle and examine the damage. Having the appraiser go to the body shop where the car has been left is wise, because figuring out exactly how much damage a vehicle has can be complicated. Two heads are always better than one and a savvy appraiser will consult with the shop estimator. The result is you’ll get fairer compensation and a better repair.
- Claim center appraisals are frequently too low. Some insurance companies may have you visit their drive-in claims center to get a damage appraisal before you have your car repaired. You can do this, but in most cases you aren’t required to go to them. It is also important to remember that drive-up appraisals are only a preliminary assessment of the damage. Most of the time the claims center assessment is well under the actual repair cost. Often you will be offered on-the-spot compensation so you can get your car fixed right away. The problem is that drive-up claims centers frequently offer compensation that is only 65 to 80 percent of the actual repair cost. If you go to one of these centers, make sure you have real-world estimates with you in case their appraisal is significantly different from the estimator at the body shop. Ask questions and demand answers.
- It’s your choice where you get your car fixed. Some insurance carriers, or their agents, will try to steer you to a particular shop by telling you they’ve worked with them before. Some carriers will just tell you to take your car to that shop. Insurance companies often make deals with shops in order to keep their costs down. These deals may mean that inferior parts and cheap materials are used in the repair. Remember, the insurance company does not own your vehicle. It is your car and you have the right to have your vehicle repaired by whomever you wish.
- Diminished value - the insurance company’s big secret. Diminished value is something most insurance carriers don’t like to talk about because it takes money -- your money -- out of their pockets. Here’s how it works: Your insurance company is obligated to pay for repairs that restore the vehicle to its pre-accident condition and value. Just because your vehicle looks like it did before the accident doesn’t mean it is in the same condition or worth the same amount of money as before. In some cases, the mere fact that the vehicle has been in an accident makes it worth less, even if it has been properly repaired. You are entitled to be compensated for this difference, or diminished value of your vehicle, on top of whatever compensation you receive to pay for repairs. If your car has received any damage more than a minor fender bender, make sure you talk with your carrier about being compensated for diminished value. Each year, insurance companies pocket billions of dollars in diminished value because their customers failed to ask about it.
- You may not have to use imitation parts. Collision repair parts come in three categories: OEM or original equipment parts; imitation or aftermarket parts; and used parts. OEM parts are replacement pieces manufactured by the vehicle manufacturer for use on their vehicles. Imitation or aftermarket parts are made by a company other than the original vehicle manufacturer. Used parts are parts recovered from a salvage yard and they can be OEM or aftermarket. In order to keep costs down, your carrier may have a clause in your policy that requires the use of imitation or used parts on your vehicle. The use of these parts, however, may not fully restore your vehicle to its pre-accident condition and value because they are often inferior in quality to the OEM parts your vehicle was designed to use. Not all aftermarket parts are of poor quality, but many of these parts do not have the corrosion protection of the original or do not fit properly on installation. Used parts offer a whole new set of problems. You often have no way of knowing if the used part is OEM or aftermarket. Furthermore, a used fender may have previous damage that has been repaired. In most cases you do not have accept a used part that has been previously repaired for use on your vehicle unless the original part on your vehicle had similar repairs in the past.
Peter D. duPre is iCARumba Content Editor.
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