Auto Insurance Total Loss: What's Next?

If your car is totalled, it means that the cost of repairing the damage is greater than the value of the vehicle. In this case, your insurance company will pay out the car's actual cash value, minus any deductible, and take possession of the car to sell as salvage. However, you have options if your car is totalled; you can choose to keep it, repair it or sell it yourself in return for a smaller settlement. You can also appeal the settlement amount.

You can keep your car, but it will have a salvage title

If you want to keep your car after it's been totalled, you can, but there are a few things to be aware of. Firstly, your state laws need to permit it. Some states don't allow you to drive or sell vehicles with salvage titles, and some won't even let you keep a salvage vehicle for any purpose.

Secondly, you'll get a smaller insurance payout as your insurer will subtract the car's salvage value from it.

Thirdly, you'll need to obtain a salvage title, and possibly a rebuilt title, and this will make it harder to insure your car. Some insurers won't cover salvage vehicles at all, and those that do will likely charge higher rates. You may only be able to get liability coverage, and it may cost up to 20% more than for a car with a clean title.

If you do decide to keep your car, you'll need to repair and insure it to get it back on the road. You'll also need to get it inspected to ensure it's roadworthy, and you may need to get it registered with the Department of Motor Vehicles.

Your insurance company will pay you the vehicle's value minus any deductible

When your insurance company totals your car, they will pay you the vehicle's value minus any deductible. This is known as the Actual Cash Value (ACV) or the fair market value. The ACV is determined by factors such as the vehicle's year, make, model, mileage, condition, and any upgrades. The insurance company will send an adjuster to assess the damage and estimate repair costs. If the cost of repairs exceeds the vehicle's value, the insurance company will declare it a total loss.

It's important to note that the insurance company will not pay for the cost of an equivalent new model or guarantee a payment equal to the amount you may still owe on the car. The ACV will always be less than what you paid for the vehicle, even if it's relatively new, as it takes into account depreciation, wear and tear, and mileage.

If you owe money on a financed or leased car that has been totaled, your insurer will send the payment to your lender for the ACV minus any deductible. You should continue to make payments to your lender until the insurance company issues the payment to avoid any negative impact on your credit. If the insurance payment is not enough to pay off your loan, you may be responsible for the remaining balance unless you have gap insurance, which covers the difference.

You can appeal the settlement amount if you think it's too low

If you think the settlement amount offered by your insurance company is too low, you can appeal the decision and try to negotiate a higher payout. Here are the steps you can take:

• Dispute the settlement offer: Contact the insurance provider and inform them that you disagree with the settlement amount. They may ask you to provide the reasons for your dispute, so be prepared to explain your position.
• Don't accept the payment: Cashing a cheque from the insurer is usually considered acceptance of their offer. Therefore, refrain from accepting any payment until you reach an agreement. If needed, you can request a cheque for the vehicle's undisputed amount (usually its salvage value) while continuing to negotiate the remaining amount.
• Research comparable vehicles: One of the critical factors in determining your totalled car's market value is the selling price of similar vehicles (comps) in your area. If you find that most comparable vehicles are selling for a significantly higher price, you can use this information to support your claim for a higher settlement.
• Research your state's insurance laws: Your state's insurance laws and regulations may impact your total loss settlement. For example, if you are found to be partially at fault for the accident, your settlement offer may be reduced accordingly. Understanding the relevant laws will help you make a more informed case.
• Make a counteroffer and provide supporting evidence: You will need to provide a compelling reason for why your vehicle should be valued higher. This could include receipts for recent upgrades or services, alternative comps in your area, a higher repair estimate from a trusted mechanic, or photos showing that your vehicle was in better condition than stated in the insurance company's appraisal.
• Consider hiring an independent appraiser: Insurance companies typically have their own appraisers or adjusters. However, by hiring your own appraiser, you can get a second opinion on the vehicle's value, which can strengthen your argument for an adjusted settlement amount.
• Consider hiring an attorney: If negotiations with the insurance company are unsuccessful, you may want to seek legal representation. Keep in mind the potential costs of hiring an attorney and ensure that the potential increase in your settlement amount justifies the expense.

Remember, the process of negotiating a total loss settlement may vary depending on your state's laws and the specific insurer. Always review your insurance policy carefully to understand your rights and options in the event of a total loss.

The car's actual cash value is determined by factors such as year, make, model, and mileage

When an insurance company declares a car a total loss, they will reimburse the owner for the car's actual cash value (ACV). The ACV is determined by the car's depreciation and the replacement cost of the vehicle. Factors that influence a car's ACV include its year, make, model, and mileage.

A car's ACV is calculated by determining its market value and then subtracting its depreciation. The market value of a car is influenced by its make, model, and year, as well as its location and condition. For example, vehicles that are frequently driven in harsh weather conditions generally have more wear and tear, causing them to depreciate faster than a car operating in a moderate climate.

Online tools like Kelley Blue Book (KBB), Edmunds, and the National Auto Dealers Association (NADA) can help determine a car's market value. However, it is important to use multiple tools and compare values as these tools may overestimate a vehicle's value or make different assumptions about its condition.

Once the market value is determined, depreciation must be calculated. Depreciation is influenced by factors such as mileage, wear and tear, and accident history. Online depreciation calculators can be used to estimate depreciation, but it is important to note that there is no exact formula, and values may vary.

After determining the market value and depreciation, the ACV can be calculated by subtracting the depreciation from the market value. This figure represents the car's value in its current condition, taking into account factors such as year, make, model, and mileage.

You will need collision coverage to receive a settlement offer for a total loss

If your car is damaged in an accident, your insurance company will send a claims adjuster to assess the cost of repairs. If the adjuster determines that the cost of repairs exceeds the value of the car, the insurance company will deem your vehicle a total loss.

In this case, your insurance company will make you a settlement offer. The settlement amount will be the actual cash value (ACV) of your car, which is calculated based on factors such as the year, make, model, and mileage of the vehicle. It's important to note that the insurance company will never pay more than the ACV, and this amount may not be enough to pay off your car loan if you financed your car.

To receive a settlement offer for a total loss, you will need to have collision coverage on your insurance policy. Collision coverage pays for damage due to crashes, while comprehensive coverage pays for non-collision damage, such as flood damage or vandalism. If your vehicle is totaled as a result of vandalism, fire, or hitting wildlife, you will need comprehensive coverage to receive a settlement offer.

Frequently asked questions