Car accidents can be traumatic events to experience, even for the most prepared and seasoned of drivers.
There are nearly 150,000 road-related casualties each year, from fender-benders to life-threatening situations; even the lightest of accidents, though, bring a new dimension of difficulty in the form of cost. What are some of the key costs relating to the incidence of a road traffic incident?
One of the bigger financial costs that a victim of a car accident will notice is an ongoing one, in the form of a shift in their insurance premiums. Where someone is at fault in an accident, the insurance claims that other parties place will be paid by their insurance policy, and result in a perceived increase in financial risk to the company. As such, insurance rates go up.
Even in the event that an accident is not the fault of a given driver, insurance companies may make the assumption that the victim is of higher risk of experiencing another accident in the future. As such, even where claims aren’t made, the cost can increase.
Insurance costs are by no means the only costs that can be impacted by an accident. While insurance swallows the majority of immediate costs relating to an accident (generally followed by the aforementioned increase in premiums), there are uninsured costs that also emerge from an accident, which must be paid out of pocket.
These costs can vary widely, and can also be recouped in other ways – such as civil action against the person at fault. These might involve private healthcare costs, additional costs relating to alternative transport while a car is being repaired, or even certain repair costs that an insurance company simply will not cover.
Vehicle Value Depreciation
Vehicle repairs after an accident are not the end of the story for the vehicle or for the potential cost consequences of a car accident. In instances where extensive repairs are required, where repairs are somewhat bodged, or even the type of repairs required is not well documented by the necessary parties, the vehicle itself can suffer value-wise. Refurbished vehicles attract a low resale price on the market, as do vehicles with murky repair histories; as such, someone who suffered a car accident may not be able to fetch as much as they’d hoped for their vehicle in the future.
Loan Repayments, and Negative Equity
If a driver does not outright own the vehicle they endured an accident in, there is a significant financial risk. Leased or financed vehicles, especially new ones, represent a large financial outlay which can be lost entirely in write-off situations.
Gap insurance is designed to cover the total value of these arrangements above market price, and is a powerful tool against the key risk present here: that of ‘negative equity’. Negative equity describes situations where the amount left to pay on a finance agreement is larger than the value of the financed article; where a car is totalled and its value decimated, owners can be saddled with debts for a car that functionally no longer exists.