Alyssa Lane
If your vehicle has been damaged in an accident, by a natural disaster, or through theft, your insurance company may deem it a total loss. This means that the cost of repairing the car is more than its actual cash value (ACV) at the time of the incident. In this case, your insurance company will pay you the ACV of the car and take possession of the vehicle.
If you disagree with the insurer's valuation of your car, you can try to negotiate with the company or dispute their decision by hiring your own appraiser and mechanic, and contacting your local department of insurance.
| Characteristics | Values |
|---|---|
| When is a vehicle considered a total loss | When the cost of repairing the car is more than its actual cash value (ACV) or market value |
| What is the total loss formula (TLF) | Cost of Repairs + Salvage Value ≥ Actual Cash Value |
| What is a constructive total loss | When the repairing cost exceeds 75% of the car's insured declared value (IDV) or market value |
| What to do if you agree with the insurer's assessment | Sign over the title and send it to the company |
| What to do if you disagree with the insurer's assessment | Negotiate with the company, ask how they determined the car's worth, and provide evidence that the car is worth more |
| What to do if you disagree that your car is a total loss | Inform the insurance company ASAP, as you may have the option to keep your car (owner retained salvage) |
| What to do if you can't come to an agreement with the insurer | Ask to speak to a claims supervisor, request an appraisal, or file a complaint with the relevant state department |
| How to account for insurance proceeds | Remove the value of the damaged assets from your books and record the proceeds |
What You'll Learn
What is 'total loss' in car insurance?
A total loss in car insurance refers to a situation where a car is damaged to the extent that the cost of repairing it is more than its insured declared value (IDV). Typically, when the repair cost of a vehicle exceeds 75% of its IDV, it is considered a total loss. This can occur in two scenarios: theft or an accident that renders the car unusable.
In the event of theft, if the car is not recovered, it is deemed a total loss. In the case of an accident, if the cost of repairing the vehicle exceeds 75% of its IDV, it is also considered a total loss. This threshold may vary depending on local regulations and insurance company policies.
When a car is declared a total loss, the insurance company will reimburse the policyholder. The reimbursement amount is typically based on the car's IDV, which is adjusted for depreciation and other factors. The IDV is determined at the beginning of each policy period and is calculated by subtracting the applicable depreciation from the car's ex-showroom price.
It is important to note that total loss insurance does not cover the actual replacement cost of a new car but only the current market value of the insured vehicle. If individuals want to ensure they receive the full replacement cost, they can purchase additional coverage, such as a return-to-invoice add-on insurance policy.
Texas Schools: Vehicle Insurance?
You may want to see also
What to do if you agree with the insurer's assessment
If you agree with the insurer's assessment that your car is a total loss and agree with their valuation, you will need to sign over the title and send it to the company. The company will then pay the lienholder first. If the payout exceeds the amount you owe on the car loan, you will receive the difference.
If you plan on keeping your car, this is called owner retained salvage. The company will deduct the amount they would get for selling the car as salvage from your claim payment. The insurer is required to notify the state that your car is a total loss and that you have retained ownership. There may be certain steps you need to take before your car can be driven on the road again, so be sure to check the relevant state laws.
Keep in mind that a car with a salvage title is likely to be worth less and may be more difficult to sell and insure in the future.
Vehicle Insurance: Owners' Purchasing Guide
You may want to see also
What to do if you disagree with the insurer's assessment
If you disagree with the insurer's assessment, there are several steps you can take to protect your rights and seek fair compensation:
Gather Evidence
Document the accident scene, obtain medical records, collect repair estimates, and review your policy. Familiarize yourself with your insurance coverage and rights under the policy.
Be Patient and Persistent
Don't settle for less. Negotiate with the insurer for a fair settlement. Ask how they determined the value of your car and make sure all the information used to calculate that value, such as options, mileage, and condition, is correct.
Consider a Second Opinion
Get an independent appraiser or lawyer to assess your claim's value. You can hire your own appraiser and mechanic to provide a second opinion on the value of your car and the cost of repairs.
Mediation and Arbitration
Explore alternative dispute resolution methods to resolve disagreements.
Speak with a Car Accident Lawyer
Seek legal counsel to understand your options and potential legal action. A lawyer can answer your questions, negotiate with insurers, and represent you in court if necessary. It's worth the expense of hiring a lawyer when you don't feel the insurer is offering a fair settlement.
File a Complaint
If necessary, file a complaint with the insurance company or regulatory authorities. If you are unable to settle the situation with the claims adjuster or their supervisor, you may file a written complaint with the insurer's complaints department. If the complaint is still not resolved, you can contact your local department of insurance or transfer your file to the relevant financial authority.
Fleet Vehicle Insurance: What Changes?
You may want to see also
How insurance companies determine if a car is 'totalled'
Insurance companies determine a car to be "totalled" when the cost of repairing the damage exceeds the vehicle's book value at the time of the crash. This is also known as the vehicle's actual cash value (ACV).
Each US state has its own threshold for declaring a vehicle a total loss, but insurance carriers may choose to use a lower threshold. For example, in Alabama, a vehicle is considered a total loss if the cost of repairs is 75% or more of its ACV. In Oklahoma, this threshold is 60%.
Insurance companies will also total a car if they consider it would be unsafe to drive, even after repairs are made.
If an insurer totals your car, they will pay you the vehicle's ACV, which is how much the car was worth just before the loss, including a reduction in value for depreciation.
To determine the ACV, insurance companies will consider the make, model and year of the car, the sales price of similar cars in your area, and the salvage value (resale value of parts and metal).
If you disagree with the insurer's valuation of your car, you can dispute it by hiring your own appraiser, negotiating with the insurer, contacting your local department of insurance, or talking to a lawyer.
Stolen Vehicles: Insurance Claim Process
You may want to see also
What to do if your car is declared a total loss
If your car is declared a total loss, there are several steps you can take to settle your claim and get back on the road. Here is what you need to do:
File a claim
Contact your insurer as soon as possible to file a claim. Total loss claims can take a long time to process, so it is important to act quickly. If another driver was involved in the accident, be sure to contact their insurance company as well.
Tow your car to an approved auto shop
While you can tow your car to any auto shop, it is recommended to take it to a shop approved by the insurance adjuster handling your claim. The shop will provide an estimate for repairs, and the adjuster will decide whether to total the car.
Gather your paperwork
You will need to provide the insurance company with your car's title. If you do not have it, you can request a copy from the Department of Motor Vehicles in your state. If your car is totalled, you will likely need to sign the title over to the insurance company.
Research your car's actual cash value (ACV)
Before agreeing to an insurance payout, it is important to research your car's ACV. Look at auto websites, newspapers, and car dealerships in your area to determine the current market value for similar cars. Tools like Kelley Blue Book can also help you estimate your car's ACV.
Review your car loan
If you are still making payments on your car, you will need to know how much you owe. The insurer will typically pay the settlement money to your lender first, and you will receive any remaining money.
Decide whether to keep your car
In most cases, you have the right to retain your vehicle even if the insurance company declares it a total loss. If you choose to keep it, the insurance company will deduct the salvage value of the vehicle from your settlement. Keep in mind that a car with a salvage title may be harder to sell or insure in the future.
Start looking for a replacement vehicle
As soon as you receive information that your vehicle may be a total loss, begin the search for a replacement. This process can take time, especially if you need to secure financing. If you have rental coverage, keep in mind that the insurance company will likely limit the amount of time they will cover for a rental car.
Receive your settlement
The insurance company will issue a settlement based on the ACV of your vehicle. If you are still making payments on your car, the settlement will go to your leasing or financing company. If the settlement is more than what you owe, you will receive the difference. If it is less, you will need to pay the remaining amount unless you have gap insurance.
Insuring Your Vehicle: Whose Name Matters?
You may want to see also
Frequently asked questions
Total loss vehicle insurance is coverage that helps pay for the cost of replacing your car after it is deemed a total loss. Generally, it refers to full-coverage policies, which include collision and comprehensive insurance.
There are two primary methods for determining when a car is a total loss: total loss threshold and total loss formula (TLF). Each state has its own total loss threshold, which could be a certain percentage or the total loss formula.
The total loss formula is the vehicle's fair market value less its salvage value. The insurer can deem a vehicle a total loss if repair costs meet or exceed the TLF figure.
