The world of motor insurance offers many different options. For starters, you can choose from various types of car insurance deals, including multiple add-ons. If you happen to participate in an accident, numerous outcomes are a possibility. You might have encountered cash loss as an option for your settlement with the insurance company. It’s the term you see for the first time, and you want to know what it means. Here is a detailed guide on what to know about the topic.
What Is Cash Loss In Car Insurance Claims Means?
If we explain cash loss settlements adequately, it’s vital to set the basics first. Now, let’s say that there has been an accident, and you filed an insurance claim. It’s time to settle with the insurance company, and they can offer you three settlement options. Those options include:
- Paying the sum required to replace your vehicle
- Replacing or reinstating your vehicle
- Paying the sum that compensates for the damages or vehicle loss without repairing the car.
The last option describes a cash loss settlement. That is why the definition of a cash loss would be a settlement where the insurance company agrees to pay for the damage caused on a vehicle without the repair.
When Can You Get A Cash Loss Offer?
A cash loss settlement is frequent if your car has suffered a constructive total loss in the accident. A total loss occurs when the required repair goes over 75% of the vehicle’s estimated market value [A1]. That means the sum necessary to compensate for the damage is over 75% of what you agreed to value the car in the signed insurance policy. Now, it’s worth noting that a cash loss offer might also consider situations where the vehicle is beyond repair. It might have crashed entirely in the accident, and the only option is to get a new car. Those are situations when the insurance company might choose to pay the sum insured in cash. They don’t require you to repair the vehicle for that money – instead, you can use it to purchase a new car yourself.
The idea of a cash loss settlement is to follow the principle of indemnity. That is a principle that ensures that you return to the financial situation before the accident occurred. Now, the insurance company might replace the vehicle or its components with similar ones, and it also has the option to offer you a cash loss settlement. The sum should follow the indemnity principle and ensure that you are not damaged or rewarded. Instead, it should estimate the situation realistically and return you to the financial position you found yourself in before the accident occurred.
How To File An Insurance Claim
The first thing to note is that you can only file any damage to your vehicle with your insurance company if you have your damage claim. It covers first-party damages, which means the damages on your vehicle. Here are the simple steps to follow:
- Take photos of the accidents, write down the culprit’s license plates, look for witnesses and ask them to support your claim if necessary.
- File a police report if required.
- Reach out to the insurance company as soon as possible. Ask about the documents required to file your particular claim.
- Make sure the documents offer comprehensive and accurate information.
Once you file the claim, wait for the insurance company to assess it and respond. From there, you can discuss the settlement specifics.