You Can Do Everything Right and Still Get Stuck With a Huge Bill in a Car Accident. Here’s Why

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Insurance pays the fair market value of a car if it’s totaled. But find out why that may not be enough to get a new car without spending out of pocket. [[{“value”:”

Auto insurance is supposed to protect against financial loss. But that’s not always the case in every situation — even for drivers who aren’t at fault for a crash, who have plenty of insurance coverage, and who do everything right.

In fact, there’s a very common situation where someone who wasn’t at fault at all could find themselves with a big bill to pay personally, despite an auto insurance company supposedly covering the costs.

This is a common — and costly — problem after a car accident claim

There’s a really simple reason why a person who does everything right in a crash could find themselves facing big bills they personally have to pay. The issue is that auto insurance pays for the fair market value of the vehicle at the time of the accident. And it may not always be possible or reasonable to find a replacement car at that price.

Most people are aware of this issue with brand-new cars. A new car loses around 15% to 20% of its value as soon as it is driven off the lot since it is no longer “new.” This means a driver who has a $40,000 car for a month or two and gets into a crash could get a payout of around $34,000 or so and have to pay another $6,000 out of pocket to buy a similar new car again.

The solution to that issue with new cars is to buy new car replacement insurance, which many insurance companies offer. But there’s also a similar problem with older cars that doesn’t have such an easy fix.

Older cars could be a big problem to replace

Let’s say that a driver has an extremely well-maintained 2014 SUV that they’ve taken care of and kept in awesome condition. If someone totals their car in 2024, they won’t get much for their 2014 vehicle — maybe around $7,000 or $8,000 depending on the vehicle model (or perhaps more for a luxury car).

Now, that person could try to find a similar 2014 SUV for that price, which has been as well-maintained as theirs was, but that simply may not be possible. And if that’s the case, they’d likely have to upgrade to a newer model with more availability and more guarantee of reliability — but that comes at a much higher cost than the old model vehicle they wanted to keep forever.

This exact scenario happened to my in-laws a few years ago and they ended up spending thousands to get a newer car since they couldn’t find a reliable used model within hundreds of miles that was comparable to the one they had. And it could happen to anyone in that situation.

Unfortunately, there’s not much drivers can do about this, since there’s no such thing as “old car replacement” coverage. The best option is to make sure to be fully insured to get as much as possible after a potential accident, and to have emergency cash in a savings account. This is just in case the worst happens and an accident does necessitate buying a new car at a higher price than the insurer is willing to pay.

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