How To Prepare Financially Before An Auto Accident Even Happens

Monday, May 25, 2020, 6:00 AM | Leave Comment

In 2019, an estimated 28,00 people lost their lives to auto accidents, and about 4.4 million people were injured severely enough to require medical attention.

These are certainly scary statistics to think about, but with so many vehicles on the road, the possibility of anything from a fender bender to a total-loss crash is possible on any given day.

The question is, are you financially prepared?

There are many costs that can arise after an auto accident that you may not even consider.

Of course, there will be damage to your vehicle and any medical bills you may face due to injury.

But what if your injury is enough to keep you out of work? Do you have money saved up to live on while you recover? If the other driver was at fault, you might want to hire an attorney to recoup some costs. Do you have money for that?

As technology continues to advance, we will begin to see a rise in driverless cars, but even then, there is still the potential for accidents. The point is that you want to be prepared for the inevitable.

Here are some tips for doing just that.

How To Prepare Financially Before An Auto Accident Even Happens

  • Accident Prevention

    A guaranteed way to avoid extra costs is to prevent a car accident from occurring in the first place with smart driving practices. Whenever you are behind the wheel, you need to pay attention to your surroundings, and you should never drive distracted. Take phone calls on a hands-free device or keep your phone on the seat beside you and turn it on silent.

    Fender benders are very common and happen when one driver is following too closely behind another. To avoid the risk, keep a two-second space between you and the car you are following. When it rains or snows, double that cushion. Don’t let external forces impact your safe driving. That means keeping all kids seated and buckled in and never driving when you are overly tired.

    Those who drive motorcycles have to be extra cautious as they have fewer safety features, and they are more open to injury. Motorcyclists need to keep an eye on their mirrors and always know what is behind and to the side. Car and motorcycle owners both need to use turn signals at all times, so no one is caught by surprise, especially when changing lanes. Most importantly, to limit injury and financial costs after a motorcycle accident, make sure that you are always wearing protective gear, including a helmet and boots that cover your ankles.

  • Find Good Auto Insurance

    The best way to be financially safe after a car wreck is to have a good car insurance policy in place. A lack of insurance will almost certainly result in financial ruin, so take the time to research and talk to insurance companies to understand the details of different policies and how they’ll help if you are in an accident. Take your time on this and always read the fine print so you know what you are getting into.

    There are a couple of things to look at when purchasing auto insurance. For one, make sure to choose a reasonable deductible that you know you can properly save for if an incident were to occur. A deductible is an amount you pay before the insurance company handles their part of the deal and pays for your car and any other expenses set forth in your policy. Deductibles can be as low as $250. Keep in mind that a lower deductible may mean a higher premium, but it should still be within your budget.

    If you are in a major accident that destroys your car, you will be faced with the immediate issue of not only being without a vehicle but also the inability to drive to work, which could lead to more long-term money problems. Try to avoid this situation by getting a policy that includes gap insurance. If you are financing a new car and you have not yet finished payments when you get in a car accident, the insurance may not cover the rest of the money you owe on your loan. Gap insurance would help to pay for any remaining balance you owe. Spend a little extra money on your premium to get gap insurance now, and you could get back on the road much faster.

  • Start Saving Now

    Earlier, we alluded to the many costs that can be associated with an auto accident. It starts with car replacement and loss of income, but it can get much worse. If you are injured badly enough, then you could be on the hook for major medical bills, including extra services like therapy and mental health sessions. For instance, occupational therapy helps people learn or relearn basic daily tasks. In the case of an accident, it can include relearning job functions like typing. Even if you are reimbursed by the insurance company, or you win a lawsuit, that money may not come in right away, so you will want to have an existing nest egg.

    The easiest way to put money aside with as little temptation as possible is to contact your employer and divide your paycheck so that a portion is automatically put into a separate account on payday. Ideally, this would be a high-interest savings account where you can accrue interest while it sits. You can call this your emergency fund, and it is completely off-limits unless absolutely necessary. If you can save 20% of your paycheck, then you’ll be in good shape.

    You can also save money by creating a budget and cutting down on unnecessary expenditures. Skip going out to lunch at restaurants every day and pack a lunch at home. Avoid the coffee shop and make your own. Then, when you have money left over at the end of the month, put it in your savings account.

    Another tool is a health savings account (HSA), which is a savings account tied to your health insurance. You can contribute money each month, and if you don’t use it, the account accrues interest. You can set it and forget it with your employer or your individual health plan, and if you do have a car accident where you need extra funds, you will have an extra place to look.

No one wants to get in a car accident, but if you are in such a situation, it is good to be prepared. Create plans for the unforeseen now and worry less later.

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