Vehicle Totaled: What To Tell Your Insurer

If your car has been in an accident and your insurance company deems it totaled, this means that the cost to repair your vehicle exceeds (or is close to exceeding) what your vehicle is worth. If an insurer totals your car, you can receive payment for what the company deems the car is worth, minus your policy's deductible.

The formula for determining whether a car is totaled varies by state. There are two common methods to determine a total loss: the total loss threshold and the total loss formula. If you disagree with your insurance company's valuation of your vehicle, you can dispute it.

Explain the accident and ask for their total loss formula

When explaining the accident to your insurance company, it's important to provide as much detail as possible. Describe the circumstances leading up to the incident, the damage sustained by your vehicle, and any relevant information that could impact the assessment of its value. Be sure to have supporting documents and evidence readily available. This can include repair shop records, maintenance history, and photos of the vehicle before the accident.

Now, let's discuss the total loss formula and how it's used to determine whether a vehicle is considered a total loss. The total loss formula (TLF) varies by state and insurance company. In some states, the TLF is calculated by subtracting the vehicle's salvage value from its fair market value or actual cash value (ACV). The ACV is determined by considering factors such as depreciation, mileage, condition, market demand, and any modifications made to the vehicle. If the estimated repair costs exceed the TLF, the insurance company will likely declare your vehicle a total loss.

For example, let's say your vehicle's fair market value is $15,000, and the salvage value is estimated to be $4,000. Subtracting the salvage value from the fair market value gives us $11,000. In this case, if the estimated repair costs exceed $11,000, the insurance company is likely to total your car.

It's important to note that each insurance company and state may have different methods for calculating the TLF. Some states use a total loss threshold, which is a specific percentage of the car's market value or ACV. Understanding the specific TLF used by your insurance company and state is crucial in determining whether your vehicle will be considered a total loss.

Remember to review your insurance policy and understand the coverage you have. Comprehensive coverage and collision coverage are often included in full coverage policies and can provide protection in the event of a total loss. Additionally, consider consulting with a professional appraiser to get an independent assessment of your vehicle's value, especially if you believe the insurance company's valuation is too low.

Ask for a total loss valuation report

If your vehicle is totaled, the insurance company will give you the vehicle's actual cash value (ACV). The ACV is the amount the vehicle was worth immediately before the loss, including a reduction in value for depreciation. This means that the ACV will be less than what you paid for the car, even if it is relatively new.

To calculate the ACV, most insurance companies use a third-party vendor that aggregates vehicle data. The insurance company will then send an adjuster to inspect the damage and estimate the repair costs. If the damage exceeds the insurance company's total loss criteria, they will declare the vehicle a total loss.

If you disagree with the insurer's valuation of your car or repair estimate, you have a few options. Firstly, you can speak with your examiner and stress the heavy impact of the accident, any car improvements and repairs you've made, and the financial toll it will have on you.

If that doesn't help, you can request an expert, independent evaluation. Find an evaluator in your neighborhood online and pay for an assessment. You can also check with a local governing authority. A state-appointed representative will decide whether or not you obtained a reasonable evaluation from the insurance company. If you still can't agree, you can go to a judge-appointed arbitrator to help resolve the matter. As a last resort, you can file a lawsuit against the insurance company.

You can also ask the insurance company what source it used to decide your car's value. Be prepared to show what the car would sell for in your area by getting quotes from used car dealers, viewing prices online, and looking for local ads for similar vehicles.

Discuss keeping your totalled car

Keeping a totalled car is an option, but it's important to be aware of the pros and cons, as well as the financial and legal implications.

Firstly, you need to inform your insurance company that you want to keep your totalled car as soon as possible. The insurance company will then pay you the vehicle's cash value minus any deductible due and the amount the car could have been sold for at a salvage yard. This means that you will have to arrange and pay for any repairs yourself. Safety should be your primary concern when keeping a totalled car. While some damage may be cosmetic, other issues may be invisible, such as cracks in the frame or to airbags.

If you do decide to keep your totalled car, you will need to get a new title from the Department of Motor Vehicles before you can drive it again. Your car will likely be issued a salvage title, which could make it harder to sell or insure in the future. Some insurance companies may not accept a car with a branded title, and you may struggle to find collision and comprehensive coverage.

If your car is relatively old and has low market value, keeping it may make sense if the damage is mostly cosmetic. You could also use it as a parts car for restoration or repair projects. However, once repairs begin, more damage may be discovered, and the cost of repairs may exceed the original estimate. Once repaired, the car must pass a state inspection, and you will need to apply for a salvage or rebuilt title.

In summary, while keeping a totalled car is an option, it is important to carefully consider the financial and legal implications, as well as the potential safety risks.

Ask about a cash settlement

If your car is totaled, you might expect your insurance company to pay you what you paid for your car so that you can replace it with a similar one. However, you may find their estimate of your car's fair market value unreasonably low. If that happens, you can try to negotiate for a higher payment.

Remember that insurance companies are businesses, and their ultimate goal is to make a profit. They won't raise the estimated value of your car just because you think it's worth more. The insurance company will want to see compelling evidence.

• Independent research: Research your vehicle's worth using sites like Kelley Blue Book and NADA Guides. Compare your vehicle's make, model, year, features, condition, and mileage to the value ranges listed.
• Gather evidence: Bring any evidence showing a higher value, such as photos of customized features or recent major repairs.
• Provide documentation: If the insurer's initial offer seems too low based on your independent research, provide documentation supporting a higher value and politely request a reassessment.
• Negotiate directly: Negotiating directly with the adjuster is your first recourse, but be firm on points where their valuation seems off.
• Request an appraisal: If negotiations stall, request an appraisal to get a neutral third-party opinion on the vehicle's fair market value. Insurers sometimes increase offers to avoid the added time and expense of an appraisal.
• Consult an attorney: As a last resort, consulting an attorney may be necessary if the insurer refuses to negotiate fairly. An attorney can demand supporting evidence for the insurer's low offer and possibly pursue bad faith claims if unreasonable conduct is evident.

It is important to note that the negotiation process is not solely about the vehicle's market value. Other elements, such as the car's financial status (leased, financed, or owned outright), play a pivotal role in the final settlement. For example, if you have a car loan and the balance on the loan exceeds the car's value, you may find yourself covering the difference unless you have gap insurance.

Discuss the next steps with your insurer

If your car has been totaled, the first thing to do is contact your insurer to file a claim. The insurance company will then send an adjuster to assess the damage and estimate the cost of repairs.

The insurer will then use the adjuster's estimate to calculate the total loss of your vehicle. This is done by taking the actual cash value (ACV) of the car and subtracting any applicable deductibles and fees. The ACV is the car's market value at the time of the accident, which includes a reduction in value for depreciation.

If you have a loan or lease on the vehicle, the settlement amount will first go to the lender or leasing company. If there is any amount remaining, it will be given to you.

You may be able to keep your totaled car, but this depends on the laws of your state. If you choose to keep the car, the insurer will deduct the salvage value from the total settlement amount. You will then need to follow your state's guidelines for repairs and have the car inspected to meet safety requirements.

If you disagree with the insurer's valuation of your car, you can dispute it by providing evidence that your car is worth more than what they are offering. This can include documentation of upgrades, maintenance records, and photographs of the car. You may also be able to hire your own appraiser to inspect the car and prepare a report.

It is important to note that keeping a totaled car can lead to some challenges. The car will need to be repaired, inspected, and reinsured, and you may have trouble finding an insurance company that will cover a vehicle with a salvage title.

In summary, the steps to take with your insurer after your car has been totaled include filing a claim, assessing the damage, calculating the total loss, receiving the settlement, and deciding whether to keep the car or not. If you disagree with the insurer's valuation, you can dispute it and provide evidence to support your claim.

Frequently asked questions