Insurance Total Loss: What's Next?

If your car has been in an accident, you may be wondering whether you need to notify anyone if your insurance company declares it a total loss. The answer is that it depends on where you live. In California, for example, you are required to notify the DMV if your car is totaled. Failure to do so may result in fines and penalties.

A car is typically considered totaled when the cost to repair it is greater than its actual cash value (ACV) or market value at the time of the accident. This can happen even with minor damage if you have an older car with a low ACV. If the insurance company declares your car a total loss, they will usually compensate you for its value rather than covering the cost of repairs.

What is a totalled car worth?

A "totalled" car is a car that an insurance company has deemed a total loss. This means that the cost to repair the damage exceeds the vehicle's book value at the time of the crash. In other words, it's worth less than the cost of repairs.

When a car is totalled, the insurance company will pay its owner the actual cash value (ACV) of the car, which is how much the car was worth just before the loss, including a reduction in value for depreciation. The ACV is determined by the car's year, make, model, and mileage.

There is no clear-cut method for determining the value of a totalled vehicle. It's ultimately up to the adjuster, but it may be open to discussion. An adjuster will be sent by the insurance provider to assess the damages and determine whether the car will be considered a total loss. If it is, they will appraise its value based on its condition immediately before the accident occurred. A third-party adjuster will also be consulted to ensure a fair price is given. The insurance company will consider the actual cash value given by both adjusters to decide what the vehicle is worth.

What is a car's actual cash value?

A car's actual cash value (ACV) is how much it is worth when taking its depreciation into account. In other words, it's the amount you could reasonably expect to get for it if you sold it today.

When a car is damaged in an accident, an insurance company will send a claims adjuster to assess how much repairs will cost. They will then decide whether the car is worth repairing or if it should be written off as a total loss. If the damage to the vehicle exceeds a certain percentage of the ACV, the insurer will declare it a total loss and reimburse the owner for the car's ACV (minus any deductible). The threshold for "totaling" a vehicle varies by state and insurer.

The ACV of a car is calculated by subtracting depreciation from the original purchase amount. Factors that can affect a car's ACV include:

• Mileage
• Make and model
• Vehicle options and upgrades
• Wear and tear
• Accident history
• Location
• Local demand
• Exterior and interior condition

If you disagree with the insurer's valuation of your car's ACV, you may be able to negotiate a higher payout. However, you will need to provide evidence to support your claim, such as research on similar vehicles for sale in your area.

Who gets the insurance cheque?

When an insurance company declares a vehicle a total loss, they will reimburse the owner for the fair market or book value of the vehicle immediately before the loss occurred, minus any deductible and fees. If you own the car outright, you will receive the cheque. If not, the cheque goes to the leasing company or lender, also known as the lien holder.

If you owe money on the vehicle, you should notify the lending company that your car has been totalled. Lenders will usually require payment in full for the loss of your car. If you leased your car, you are still obliged to pay the monthly instalments on your totalled vehicle. Totaling a leased vehicle does not void the lease contract.

If you have a car loan or lease, you will still have to pay your lender even if your car is totalled and you can no longer drive it. However, the insurance company will only pay the car's actual cash value (ACV) at the time of the loss. As vehicles depreciate quickly, this may not be enough to pay off what you owe. You will be responsible for making up the difference unless you have Guaranteed Asset Protection (GAP) coverage. GAP insurance covers the difference between the amount you owe on your loan or lease and what the insurance company pays.

Can I keep a totalled car?

Yes, you can keep a totalled car. However, it depends on your state's laws. If you can buy back the car, you'll need to contact your local DMV to find out what forms you need to complete and the steps to take to start the purchase.

If you're allowed to keep the car, you won't be able to drive it right away. Once a car is deemed a total loss, it has to be repaired, pass inspection, and be issued a rebuilt or salvaged title for the vehicle. You'll need to provide the title and proof of inspection to the DMV to register the car so you can drive it on the road.

If you don't plan on driving your totalled vehicle, you may be able to keep and use it for parts on another car, or sell the parts for extra cash. You could also sell it to a junkyard or salvage yard, or donate it to a local charity.

If you keep your totalled car, the insurance company will pay you the market value minus its salvage value and any deductible. You will then be left with whatever balance is remaining and the wrecked car.

It's important to note that keeping a totalled car can have its pros and cons. An older car with low market value might be totalled with only cosmetic damage, in which case you may not need to fix it at all. You can also use it as a parts car for restoration or repair projects.

On the other hand, once repairs begin, surprises may arise, and the car may cost more to repair than the original estimate. Additionally, once repaired, the car must pass a state inspection, and you must apply for a salvage or rebuilt title, which can make insuring and eventually disposing of the vehicle more challenging.

What if I disagree with the insurer?

If you disagree with the insurer's valuation of your car or repair estimate, there are several steps you can take to dispute their decision. Firstly, you can ask to speak to a superior or the head of claims to discuss the issue and request a review of your file. It is within your rights to ask for an explanation of the insurer's rationale, including the specific clauses in your contract that their decision is based on.

Secondly, you can provide additional information and evidence to support your viewpoint. For example, if you disagree with the amount of compensation offered, you will need to find comparable cases to support your argument. If your disagreement is based on a specialist's report, you may need to hire your own specialist to obtain a second opinion.

Thirdly, you can negotiate a new settlement by presenting new information or asking the insurer to review their position. If this does not lead to a resolution, you can file a written complaint with the insurer's complaints department. Most insurance companies will have information about their complaints procedure on their website.

If you are still unable to settle the dispute, you can contact your local department of insurance, who will investigate the case and determine whether the insurer is acting unjustly. If this also fails to resolve the issue, your remaining options are arbitration and litigation. Arbitration involves a third party overseeing the dispute and making a decision, which can be binding or non-binding. Litigation, or suing the insurance company, should only be pursued if it makes financial sense, as it can be costly and time-consuming.

To strengthen your case, you can emphasise the emotional toll of the accident and provide images of the vehicle's damage. It is also important to know your car's value and have a counteroffer ready. You can use online tools and resources, such as Kelley Blue Book, to research the market value of similar vehicles in your area.

Additionally, you may want to hire your own independent appraiser and mechanic to obtain a second opinion on the value of your vehicle and the cost of repairs. Some states offer low-cost or free mediation services for auto insurance disputes, which can help facilitate a resolution without the need for litigation.

Finally, if you are still unable to reach an agreement, you may need to consult a lawyer to discuss your options for requesting arbitration or filing a lawsuit.

Frequently asked questions