The last thing you want to deal with after a car accident is insurance adjusters. What happens if your insurance company calls to tell you that your car is a total loss? Most motorists are not prepared to handle this situation.
You need to get back on the road, but what is the next step? Do you understand your options? What if you don’t agree with the insurance company’s assessment? Here’s what you need to know about settling a claim for a totaled vehicle.
How Do Insurance Companies Determine if Your Car Is a Total Loss?
Essentially, the insurance company will declare a vehicle a total loss when the cost to repair is close to or exceeds the value of the vehicle. To determine the value of your car, the insurance company may look at similar cars in your area or other sources like Kelley Blue Book. The value of your car will be determined by factors such as:
- The vehicle’s age
- Your car’s Mileage
- The condition of your car before the collision
Next, the insurance company will determine the cost of repairing your vehicle, usually using estimating software. Once these two numbers are available, state law usually will determine at what point the vehicle is considered totaled, otherwise called the total-loss threshold.
In most states, including Louisiana and Alabama, the threshold is 75%. This means that if it costs $7,500 to repair a vehicle worth $10,000, the car is a total loss. This amount differs from state to state; in Arkansas and Mississippi, it is only 70%, while Texas and Colorado require 100%. Other states do not set a specific threshold.
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What Happens When Insurance Decides Your Car Is Totaled?
Once the insurance company determines your vehicle is totaled, you have the option to accept their settlement offer or try to negotiate a higher amount. It’s important to remember that an insurance company will only offer to pay for a totaled vehicle if the accident is covered under your auto insurance policy.
This usually means that you are not at fault for causing the accident and your losses will be paid for by the liable driver. You may also be compensated if you were at fault and had comprehensive coverage on your car. Minimum coverage will not cover collision damage if you are at fault for the accident.
Whose Insurance Will Pay for a Totaled Car?
If you were in an accident with another motorist, you may file a claim with your insurance, the other driver’s insurance, or both. You may also be able to file a lawsuit against the other driver if you sustained injuries. Who pays for your totaled car depends on your insurance coverage and whether your state is a fault state or a no-fault state.
In a no-fault state, each driver files a claim with their own insurance company. In a fault state, the driver who caused the accident will be responsible for damages. If your state utilizes the modified comparative negligence rule, multiple drivers may contribute to the cause of a car accident.
How Fast Does Insurance Pay for a Totaled Car?
It’s important to negotiate with insurance before accepting their offer if you don’t think it reflects your car’s value. Once you accept the car insurance total loss settlement in writing, the insurance company will send you a check and pick up the vehicle to salvage. Usually, this process happens within a few days to weeks.
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What Happens if I Have an Auto Loan?
If you owe any money on the vehicle’s financing, you will still be held responsible for paying it. You will have to pay off your auto loan out of the settlement you receive for the totaled car. If you financed a new car purchase with no down payment, you may owe more than your car is worth due to depreciation.
However, you may be off the hook if you have total loss insurance or gap insurance. This insurance covers the difference between your vehicle’s value and what you still owe on it. Motorists who purchase new cars typically carry more insurance coverage than those who purchase used cars.
Do I Have to Accept the Insurer’s Offer on a Totaled Vehicle?
No. While an insurance adjuster may seem pushy and you might need a vehicle fast, you should remember that the offer is just that–an offer. So, how much can you negotiate on a totaled car? It depends, and you still have to be reasonable with your requests and support your position with evidence.
For example, if you can show that you recently made substantial improvements to your vehicle, you may be successful in getting the insurance company to reconsider its value. You can also contest a particular valuation method by showing that similar vehicles are worth more in your area.
If you were injured in the car crash and hired a personal injury attorney, your lawyer can handle this aspect of the claim as well and explain claim settlement tactics.
Can I Keep My Vehicle if the Insurance Company Totals It?
Yes. If you want to keep your car, the insurance company will deduct the salvage value from the total loss payout. It’s a common misconception that insurance companies force you to give up your car after it is totaled.
Bear in mind that the insurance company will only pay you what your car is worth right before the accident. If you decide to keep a totaled car and repair it yourself, you may have to pay additional money out of pocket. You will also need to acquire a rebuilt title for your car and it may be difficult to insure.
Is a Totaled Car Worth Keeping?
If your car is totaled, the insurance company has already decided that repairs will cost more than your car is worth. It might not make sense from a financial standpoint to keep your car. However, your vehicle may hold sentimental value. Classic cars may also be worth more to collectors.
Before deciding whether or not to keep your car, you should bring it to your mechanic. Get an estimate for repairs or restoration. If you choose to keep your car, you can repair it or sell it on your own.
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