Clark Howard

3 Things To Know About Lowball Insurance Estimates

When you’re the victim of a car accident, there’s a good chance that you’ll have to deal with an outside insurance company — or an insurer other than your own — to get your car repaired. And unfortunately, when you’re not their customer, you can’t expect an insurance company to look out for you.

"A lot of insurers really play dirty pool in this area," warns money expert Clark Howard. "They don't play straight with people." So, what should you be on the lookout for when dealing with someone else's insurance?

In this article, I’ll review three things to know about insurance estimates from outside insurers, including:

The Insurer’s First Offer Might Not Be Fair

Auto insurance companies have experienced "the worst [financial] performance in more than 20 years" over the last year. Unfortunately, one way some companies try to make up for losses is by lowballing third-party victims — or the people who get hit by their policyholder — after an accident.

Insurance companies don’t want to spend more money than they think they have to. This is especially true when dealing with people who aren’t their policyholders. Companies often save money by moving quickly with low settlement offers.

If you don’t have experience negotiating or dealing with insurance companies, you might be impressed by a quick offer for four figures to repair what simply looks like surface damage. But — after his vehicle was hit in a parking lot — Clark experienced just how unfair initial estimates and offers can be.

“So, I get a call within like two days from an adjuster with the insurance company. And the adjuster says, ‘…we’ve done an estimate of the damage to your vehicle and would like to send you a check for $1,150.’”

Clark politely declined the initial offer and found a Tesla-approved body shop that worked with the insurance company. Get this: The shop estimated the damages would cost $8,800 to repair! Clark says:

“It is very common where [auto insurers] lowball the other party — not their insured. When their insured is at-fault, they lowball to the third-party, like me, that was not their customer.”

In Clark’s case, the insurance company’s first offer was only 13% of what it would cost to repair his vehicle! After your car’s been hit, you might not get such an extreme lowball offer. But there’s a good chance that — when dealing with an outside insurance company — the first offer you receive will fall short of what you need to fix your car.

Accepting a Settlement Too Soon Might Cost You

Don’t feel pressured to accept the first offer you’re given from an insurance company. Firstly, it might not be a fair offer. But secondly, it might end up costing you! That’s because — depending on where you live — once you accept an offer, you won’t always be able to get more money down the line.

Let’s consider Clark’s situation again. Imagine that he accepted the initial offer of $1,150 to fix his car before he got a quote from the body shop.

“Auto insurance is regulated by the state,” Clark explains. “Some states, you take that check and it’s over. And that’s all you’re going to get. Others, that’s only an opening offer and even if you take the check, it’s not final if you get the vehicle repaired.”

If Clark waited until the check cleared before taking his car in for repair, he would’ve gotten a huge surprise! First, because he’d have been $7,650 short on the total cost of repairs! And second, he might not be able to receive any more compensation from the insurance company to cover the costs.

Depending on where you live, accepting a settlement might mean that you also waive your rights to get additional compensation from an insurance company for damages. How can you know if this applies to you? To start, always thoroughly review any documents from an insurance company before signing and accepting any offers. Additionally, you can typically find links to review related laws and regulations on the website for your state’s Department of Driver Services.

Repairing Your Car Helps Maximize Your Settlement

After an accident, you might feel fortunate if your car isn’t a total loss. But if your car only has superficial damages and you receive a quick offer from an insurer?

“A lot of times when it’s a smaller accident, what do you see when you drive around? People don’t repair their car,” Clark says. “They just leave the damage, take whatever money they get from the insurer, and they feel like, ‘Hey, I just won the lottery.’”

Choosing not to repair your car can cost you down the line though. Consider this: Right after an accident, you might not care about a few scratches. Maybe you’re on a high because things could’ve been worse, or maybe it’s the side of your car you never see. So, you take the settlement. But after a few months, you change your mind or decide you want to sell the car. Not only might the money be gone, but it may have never been enough to begin with.

Repairing your car is one way to ensure you actually get compensated appropriately.

“That’s the real test,” Clark advises. “If you’re not getting it repaired, then you’re in a weak position [for] getting a fair payment from the insurer.”

That’s because when you get your car repaired, you have documents from the body shop. These documents can be used to negotiate with the insurance company. Otherwise, it’s hard to make a case when you feel the numbers aren’t adding up to what you think you’re owed.

You should get your car repaired if you want to get the most compensation from the insurance and improve your car's value after an accident.

Final Thoughts

After a car accident, it’s normal to feel like you’ve got a lot on your plate. If so, a quick offer from an insurance company can feel like a gift. But — unfortunately — insurance companies have a track record of taking advantage of this mindset. They make lowball offers to keep money in their pockets and hope you’ll accept their offer without hesitation.

Before you accept an offer from an insurance company, be sure to do your research. Get quotes for how much it will cost to repair your car from body shops. And check out our guide on how to determine an independent value for your vehicle after an accident. Don't settle for a quick payout that will cost you down the line!

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