Here’s the deal. Someone gets in a car accident and their car gets totaled out. Instead of waiting to find out how much their 93 Ford Tempo is worth, they immediately drive to the nearest dealership and purchase a brand new Jeep Wrangler. Their reasoning, “the insurance company will have to buy me a new car because they totaled out my old one”.

Unfortunately, that’s not the way it works. Just because you had your car totaled out does not mean that the at-fault insurance company has to buy you a brand new car. The most they will be responsible for is paying you fair market value for your car that was totaled out. Let me give you a real life example:

Years ago, when I was 18, I was involved in an accident. I was driving my 1972 full size Chevy Pickup. It had rust all over, but it was the perfect truck to take out in the desert and go rabbit hunting with. It just wasn’t a very good truck to take the ladies out on a date. Long story short, the accident happened and the truck was totaled. I immediately got very excited thinking that I could finally get a brand new truck. One that was not only good for hunting rabbits, but one that was good for dating as well. Imagine my shock when the at-fault insurance company offered me… $100. What? How was I going to buy a brand new truck for $100, let alone buy a replacement truck?

Unfortunately for me, that happened to be the market value for a 72 rust bucket Chevy pickup with bald tires. Luckily, I found a 78 Chevy pickup for about $500. It was newer, so of course it cost a little more.

So remember this, when your car gets totaled out, don’t go buy a brand new car unless you can handle the new car payment. It’s not the insurance company’s responsibility to pay you for the new car or the payments. It is their responsibility to pay you market value for your old car and you should be able to get into a comparable car as the one that was totaled out with little or no additional cost to you. That is assuming you aren’t upside down in your old car.