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The Financial Fallout of a Car Accident: 6 Ways it Can Affect Your Finances

May 25, 2021
The Financial Fallout of a Car Accident: 6 Ways it Can Affect Your Finances

According to statistics, there are more than six million car accidents in the United States on a yearly level. Car accidents are a common reality of our society and bring a lot of anxiety to people. Unfortunately, most people will experience at least one in their lifetime, and car accidents can cause significant repercussions in the short term and long term, depending on the circumstances.

We often think about the physical pain and emotional distress that can come after being in an accident, but we don't always stop to consider the financial fallout that an accident can have on our lives. Car accidents can be a financial burden and result in significant expenses if not managed properly.

This blog post will cover some of the ways a car accident can affect your financial standing so you can be prepared for what is to come.

Medical Expenses

The first and most obvious way a car accident affects your finances are the medical expenses, including hospital bills for emergency care or medicine. The cost of medical care is also going to take a big toll on your finances. These costs vary depending on what injuries you are dealing with, but they can range anywhere from $200 to $2500.

You may also have physical therapy treatments that need to be covered and other services from a doctor or nurse to help you make a full recovery from your injuries.

A physical therapist can work with you on exercises and other treatments to get you back in shape after an accident. However, this will come at a cost of anywhere between $50-$100 per visit, depending on the severity of the injury and how often they are needed.

Lost Wages

The second most obvious way a car accident can affect your finances is in lost wages. If you were injured in an auto accident, it might take some time before the medical professionals will allow you to return to work, and this could result in a loss of income that must be replaced.

If work isn't possible due to injury, you could be faced with significant financial difficulties. For example, consider that a person earning $50,000 per year without any additional benefits would lose about $17,500 in wages and possible overtime during the average recovery time of nine months.

Car Insurance

Another way a car accident affects your finances is in the cost of auto insurance. Even if you are not at fault, it's possible that your premiums could increase substantially due to various factors such as increased risk or decreased driving record.

If you were found at fault for an accident with another driver, then there may be other consequences, such as increased fines and higher loss of insurance coverage. In such cases, it may be advisable to consult with a motorcycle injury attorney to help protect your legal rights and ensure that you are fairly compensated for any injuries or damages suffered as a result of the accident.

Damaged Credit Score

Regardless of who was at fault, drivers often experience a drop in their credit score and an inability to make payments on vehicles they were financing before the accident. This is because lenders will analyze your financial situation post-accident based on data from your credit report, which means that even if you were doing everything right before the accident, your credit score might be lowered because of it.

If your credit score falls, or if you are sued, it may be challenging to get approved for a loan. You might need to pay more interest or offer up larger down payments as well. Additionally, if you are sued, the other party may be able to seize assets.

Cost of Repairs

The cost of car repairs and the purchase price of a new vehicle will also be affected by an accident. If your car was totaled, then it's likely that the insurance company will offer to pay for a new one (if they cover accidents). Both your at-fault insurance company or their lawyer may try to pin you with all costs incurred from the accident, even if it's not in your contract.

Additionally, if any liens on your vehicle are worth less than the salvage value, then the lienholder is also entitled to reimbursement. If you're at fault for an accident and your car insurance deductible is set too high, then a higher cost of repairs or purchase price may be necessary to reach that amount. If so, you'll have to pay more out-of-pocket expenses than if the deductible were lower.

Potential Lawsuit

If you were negligent and have injured another person, then you may be sued by someone else involved in the accident, such as their insurance company or another driver's auto insurer. The cost of a settlement or judgment will depend on the severity of the injuries and how much fault is attributed to your actions. That is why it is good to have a call with a personal injury lawyer, so you can prepare yourself for any upcoming court judgments.

If you were at fault for an accident, then it's likely that your insurance company will cover any lawsuit costs to protect their investment with you as a customer. However, your rates may go up as well.

What should you do in the event of a car accident?

If you've been in an accident, you need to make sure you're following these steps:

  • Get help immediately. Call for emergency services, and then call your insurance company or agent so they can send you a claim form. The sooner you contact them, the quicker they'll be able to start working on your case.
  • Get the contact information of everyone involved in the accident from their driver's licenses, insurance, and registration cards.
  • If you were driving at fault for an accident that caused injuries to others or damage greater than $1000, then you are required by law to report it within 24 hours.
  • Make sure your car is safe to drive before you leave the scene of the accident.
  • Make a list of all the things that were damaged in your car. You'll need this later for insurance purposes and when filing an insurance claim.
  • Take pictures and video of any damage done to both vehicles, property, or people.
  • Get information from witnesses if they saw what happened.
  • If you suspect that the accident was caused by someone who wasn't insured, then it's essential to file a police report. You'll need this for insurance purposes and if you want compensation from another driver without fault coverage.

Final Thoughts

If you have been involved in a car accident, you need to understand the financial effects and how they may impact your life. Be sure to do a thorough assessment of your finances and be prepared for how the accident will change them.

Knowing how a car accident may impact you financially can help you be prepared. With so many people driving, it's crucial for everyone who drives or rides in a vehicle to be aware of how they will deal with these costs and what their options are should something happen.

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