Angela Colley — It’s Complicated
Dear Its Complicated: I recently went through a major flood and now I’m not sure what to expect from my car insurance provider.
About a week ago, as I was getting ready to leave for work, a sudden heavy thunderstorm flooded my street with about three or four feet of rain, submerging my car above the dashboard. The flooding only lasted a few hours but my car, a Toyota Prius, is completely undriveable. I called my insurance company who sent someone out to inspect the car and told me it was an “obvious total loss,” but I’m not sure what to expect next. I’ve never been in a flood before and after the inspector came out, it has been pretty much radio silence from the insurance company.
My friends and coworkers have been great about carting me around, but I’m ready to get back on the road and getting pretty anxious about how long this is going to take and what I should do next.
First of all, the important thing is you’re safe. In any weather event, you matter much more than your property. But, living in a flood zone myself, I understand how anxiety-inducing it can be.
While there’s countless add-ons and options you can build in, car insurance basically comes down to a few main categories, with the big three being liability, collision, and comprehensive. Liability coverage, the minimum coverage required by most states to legally own and drive a car, only covers injuries and damage for the other driver if you’re in an accident. Collision covers damage and injuries for you in an accident. Comprehensive essentially covers everything else that could happen to your car, say a tree falls on the roof, or a flash flood wrecks your car while you’re getting ready for work. If you’ve got comprehensive coverage, you’re likely covered up to your coverage limits for the flood.
So here’s the good news (and the bad news, too): provided you have comprehensive coverage, there’s not much more for you to do just yet except wait to see what your insurance company tells you. Here’s what’s happening on the insurance side while you wait to find out the damage.
When you need to file a claim, one of the first steps your insurance company takes is to send a claims adjuster out to inspect the damage, something you’ve already experienced. Adjusters are there to inspect the car, take photos, gather some research (like your last mileage), and interview you.
Once the adjuster has made a determination on your car, your insurance company has to decide if it is a total loss or repairable. Typically, they do this in one of two ways: total loss threshold or total loss formula, according to Tony Arevelo, an insurance agent and chief editor of Carsurance.net.
“The total loss threshold is expressed in percentage, and it’s calculated by dividing the repair cost of a car by its actual cash value (ACV). The most common percentage is around 75 percent, so if the repair costs are 75 percent of the vehicle’s ACV, the insurer will declare the total loss,” Arevelo says. However, he cautions that the actual percentage can vary by state and in some areas total loss threshold may not be used at all. If that’s the case, an insurance company might use the total loss formula. “The formula is the cost of repairing the vehicle plus the vehicle’s salvage value. If the total sum exceeds the vehicle’s ACV, you have a total loss,” he says.
How long this takes depends on how many claims are already on your insurance company’s plate. “Most car insurance companies have a 30-day payout goal. This means that 30 days from the flood will be sufficient for them to pay you,” says Arevelo. You may get your claim processed sooner or it may take longer—especially if a lot of people filed claims in your area after the flood. Sometime after the assessment, or in some cases after the claim has been fully processed, the insurance company will also likely call you to make arrangements to come pick up your car. If you have rental coverage through your policy, your insurance company should also arrange for a rental car.
When your claim is processed, you’ll be notified of the findings and how much you can expect to get. How much depends on your car. “In case your car is totaled, comprehensive will pay you the amount of money which is equivalent to the current market value of your car,” says Arevelo.
If, when you do get your assessment, you don’t agree with the total, you can dispute it and the insurance company will have to investigate and justify why they offered the payout they did, but I wouldn’t sweat that too much. “Most companies will do their best to make the right assessments, as they want to keep you as their client,” says Arevelo.
Once your claim is processed and you’ve accepted, the insurance company will determine who to pay. Typically, if you have a lien on your car–for example, you still owe money on your auto loan–that will be paid off first, minus your deductible. Any remaining money will go to you with one exception: If you owe more on your car than the current market value, your insurance company will only pay off up to that value. You may still owe any remaining balance, even if you don’t have the car. Typically, that can happen with new cars, as cars can depreciate in value pretty quickly, or if you had a large loan.
After you’ve gone through the insurance process, if you’re planning on getting a newer model and taking on an auto loan, you may want to consider if you’ll need gap insurance. Gap coverage does what the name implies: it covers the difference between the market value of your car and the amount you owe on your auto loan. It can be useful if you’re buying new, taking out a large loan, or live in a disaster-prone area.
Filing a claim, especially your first major claim, is stressful, but it is mostly a waiting game. The insurance company may just be swamped with calls, especially after a flood. If you feel like it is taking too long or the radio silence isn’t giving you the answers you need, remember you can always call. Most major insurance providers offer 24-hour service and a host of lesser known options like chat boxes on their websites. You can also email questions. Here’s hoping you get back on the road soon and never have to file another flood claim.