What Determines If A Car Is Totaled

What Determines If A Car Is Totaled – Accidents happen. Destructive weather like Hurricane Ian sweeps through the area, bringing flooding that overtakes your vehicle. The driver was late picking up his child from daycare, ran a stop sign and crashed into your car. Then boom, your vehicle is totaled.

If you have car insurance, you can expect your insurance company to cover the damage. Fortunately, they will if the repairs are less than the value of the car. However, if they exceed the repair value, the insurer will declare the vehicle as a total loss. The company will then give you the car’s actual cash value, or ACV — not the total cost of repairs.

What Determines If A Car Is Totaled

In this article, we will help you with some of the fine print in your insurance policy when your car is declared a total loss by the insurance company. We’ll tell you how your insurer comes to this decision, what your options are, and what a settlement might look like. We’ll answer a question or two you may not have considered.

Car Frame Damage And Other Structural Damage

Insurance companies “total” a car when the cost of repairing the damage exceeds the vehicle’s book value at the time of the accident. It’s a function of basic math and regulations in your particular state.

Insurers also believe a vehicle that they believe will be unsafe to drive even after all necessary repairs have been made. If you fix it but it’s not safe to drive, they may declare it a total loss.

If the insurer totals your car, they will pay you the actual cash value (ACV) of the vehicle. Actual cash value is the value of the car just before the loss. This includes depreciating value, so even if the vehicle is relatively new, the ACV will be less than what you paid for the vehicle.

“Book value” is another way of saying “market value”. For example, Kelly Blue Book closely monitors the car market, tracking what each make and model is currently selling as it ages. Whatever ACV is at a particular time is its book or market value.

Is My Vehicle A Total Loss?

This is where your insurance company’s policies and your state’s regulations come into play. Each state sets its own threshold for declaring vehicles a total loss, but carriers may choose to use a lower threshold. In many cases, even if the cost of repairs is less than the vehicle’s ACV, the insurance company will pay the total for the car – sometimes much less. This is because it can be difficult to determine the full extent of the damage before repairs can be made.

For example, in Alabama, the state limit for a totaled car is 75% or more of its ACV. Let’s say you have a vehicle worth $10,000. Under state law, if the damage is $7,500 or more, the insurer must declare it a total loss. However, if the insurer’s limit is 60% ACV, the vehicle is totaled when the cost of repairs is $6,000 or more.

“The reason some carriers [use a lower threshold] is because when you fix the vehicle and look at it after the loss, it’s still together. And what you can see is mostly the exterior and chassis of the vehicle. “When the body shop takes the vehicle apart and pulls the panels, they usually find more damage,” said Josh Damico, vice president of insurance operations at Jerry’s, an auto insurance comparison service.

If the body shop finds more damage after starting the repair, it will bill the insurance company for the additional damage. “Some carriers have an idea of ​​what the parts look like on a damaged vehicle. They take this into consideration when deciding when to declare a vehicle a total loss,” he said.

Can I Keep A Car Deemed A Total Loss?

If your car is totaled, the sum insured depends on the circumstances of the loss. Here are four types of total loss coverage.

If you have a loan or lease, the lender requires you to maintain conflict and comprehensiveness. Otherwise, these coverages are optional in each state.

You can avoid them, but you’re only at risk if you have liability coverage to meet your state’s minimum insurance requirements. Liability insurance only pays for injuries and damages you cause to someone else. It does not cover repairs to your vehicle if you are at fault in an accident or if there is non-accident damage.

If you want to compare car insurance or find additional coverage, you can learn more about the most common types of car insurance.

What Is A Salvage Title Vehicle?

If you have a car loan or lease, even if your car is totaled and you can’t drive it, you still have to pay the lender. However, the insurance company pays the car’s ACV only at the time of loss. Because vehicles depreciate quickly, leasing or financing your car purchase may not be enough to cover what you owe — especially if you have little or no cash.

If you don’t have GAP coverage, you’re responsible for making up the difference. GAP covers the difference between the amount you owe on your loan or lease and the amount paid by the insurance company. Many policies will even cover your collision or comprehensive deductibles.

GAP insurance is often relatively inexpensive. Your insurance agent can help you with this. We think GAP insurance makes sense and is worth the extra cost.

To determine whether it is a total loss, the insurance company must calculate the ACV of the vehicle immediately before the loss to estimate the extent of the damage. Most insurers work with a third-party vendor that aggregates vehicle data to determine ACV. The insurance company will send an adjuster to inspect the damage and estimate the cost of repairs.

Your Complete Guide To Selling Totaled Cars

If the amount of the car exceeds the limit set by the state or the insurance company, the insurer declares it as a total loss. If this happens, the carrier will reimburse you for the ACV of the vehicle.

Even if you’re in an accident and your vehicle is a total loss, your insurance company can pay for your repairs.

Depending on the state you live in, your insurance provider will use one of two methods to determine total damages.

A car’s fair market value (FMV) is its book value at a given point in time. For our purposes, this particular time is just before an event such as a flood, accident or hurricane. In the FMV system, the state sets the FMV percentage as the threshold for declaring the car as total. In the Alabama example above, the percentage set by the state is 75%. Some states, such as Oklahoma, use a lower percentage (60%), while others, such as Colorado, use a higher percentage (100%).

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Regardless of the percentage, if the estimated repairs are more than a percentage of the market value, the insurance carrier will pay the total for your car.

In states without this percentage limit, insurance companies use the Total Vehicle Loss (TLF) calculation. In this case, the number they get for the totaled car is the vehicle’s residual value minus the FMV, or the amount the insurance company can get for your car at a junkyard or salvage yard.

Let’s say your vehicle has a fair market value of $15,000. The insurance company comes to the salvage yard to find out how much they will pay for your wrecked car. Let’s say the residual value reaches $4,000. Subtracting $4,000 from $15,000 leaves $11,000. In this example, if the estimated repairs exceed $11,000, the insurance company will pay the total for your car.

If your car is totaled, there are steps you can take to settle your claim and get back on the road.

What To Do When Your Car Is Totaled

You may be able to own a totaled vehicle, but that depends on your state’s laws. “The best way to start the process is to talk to your carrier about buying back the whole vehicle,” Damico advises. If you can repossess the car, you should contact your local DMV to find out what forms you need to fill out and the steps you need to take to start the repossess.

If allowed to keep the car, it cannot be driven immediately. “Once a car is considered a total loss, it has to be repaired, pass an inspection, and eventually you get a rebuilt or salvage title for the vehicle,” Damico said. To register the car, you must provide the title and proof of DMV inspection so you can drive it on the road.

Don’t forget your car insurance. In most states, you can’t legally drive without one. However, you may be limited in the types of coverage an insurance company wants to sell you. “Some insurance companies only cover insurance or rebuild vehicles with a liability title,” Damico said. “Because it’s difficult to assess the vehicle’s current condition, they won’t cover it for comprehensive or collision coverage.”

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