Don’t Pay Your Deductible

I turned the steering wheel right to make a turn on a green arrow, and the truck began sliding left.

Immediately, I knew I was in trouble.

Wham! I slammed into a crimson Nissan Rogue in the opposing lane, completely caving in the rear left passenger door and totaling their car. I shouted a four-letter expletive, hoping I hadn’t injured anyone, and knowing my 26-year accident-free winning streak had come to an end. Being in a truck, the damage wasn’t nearly as bad for me, but it was still substantial. I lost a headlight, bumper, fender, grill, and damaged hood. Fortunately, no one was hurt.

My friends say I drive like an old man. I accelerate slowly, brake slowly, set my cruise control for 7 mph over the speed limit, and drive only during the day and in favorable weather. I secretly congratulated myself for an exceptional driving record, and my insurance company thanked me every month with a low premium. But for even the safest of drivers, statistics will eventually catch up with you.

However, what you do after a motor vehicle accident can be almost as important as the steps you take to avoid one. In addition to filing a police report, talking to your insurance company, and communicating with the other parties involved, you may have some decisions to make.

Insurance companies sometimes avoid fixing your vehicle. If the fair market value of your car is close to the cost of actual repairs, your insurance company will pay you that price (minus your deductible) and take your vehicle. This is known as totaling your vehicle. The problem with this situation is that the fair market value of your vehicle may not be what your vehicle is worth to you. So, if you crash a vehicle worth $4,000, but it costs you $6,000 to replace it, you’ll be out $2,000. This is probably more than your deductible.

If you ever run into this problem, there is a way out. Insurance companies sometimes pay you some of the cost of repairs and let you keep the vehicle. However, they will issue you a salvage title. This means if you go to sell the vehicle in the future, potential buyers will know that repair work was done and its value is reduced. If you take this money and hire a repairman who can help you for a reduced price, you may come out ahead. You might not even have to pay anything out-of-pocket. In essence, you’ll avoid paying a deductible.

Salvage titles are a great way to save money because 1. They let you keep your vehicle, and 2. They give you some cash to repair the damage. This can save you a lot because it prevents you from having to go shopping for another (newer) car.

If you have questions about salvage titles, or anything related to what car insurance is right for you, I can help you directly when you join my membership program. We’ll look at your insurance needs for your home, car, medical care, and family. Insurance is an important ingredient in personal financial success.

I also encourage you to pick up copies of my books The Money Mission, Tax Saving Strategies, and The Blended Retirement System.

Have a great weekend, stay safe, and I’ll talk to you again very soon!

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